An overview of tax-deferred accounts including useful planning tools and common FAQ’s
Whether you’re just starting out in the work force, or well advanced in your retirement planning, Scotia iTRADE is there to support you along the way to help you achieve your retirement goals.
What is a retirement account?
A Registered Retirement Savings Plan lets an individual defer taxes on money saved today. The Canadian government wants to encourage people to save by letting them defer paying taxes until they retire – when most people will be in a lower tax bracket and will pay less tax on those savings. Any money you earn in the RRSP (capital gains, dividends, distributions) is usually exempt from tax during the time the funds remain within the plan. However, you generally have to pay tax when you make withdrawals, or receive payments from the plan.
Retirement products available at Scotia iTRADE
Scotia iTRADE offers both Retirement Savings Accounts and Retirement Income Accounts designed to help make planning for your retirement that much easier. You can choose from:
- U.S.-Friendly RRSP
- Registered Retirement Savings Plan Accounts (RRSP)
- Spousal Registered Retirement Savings Plan Accounts
- Tax Free Savings Accounts (TFSA)
- Registered Education Savings Plans (RESP)
- Registered Retirement Income Fund Accounts (RRIF)
- Life Income Funds (LIF)
- Locked-in Retirement Income Funds (LRIF)
- Locked-in Retirement Accounts or Locked-in RSP (LIRA/LRSP)
Things you need to know about retirement plan accounts
A retirement account isn’t like a regular brokerage account. It’s set up specifically to help you save for a point in the future. As a result, the Canada Revenue Agency puts a few restrictions on what you can do with a retirement account. Here are some of the more common ones you should be aware of:
- You can’t trade on margin
- Limits for tax reducing contributions are set by Canada Revenue Agency
(see your Canada Revenue Agency notice of assessment)
- Options trading is limited to the purchase of equity and index call and put options, and covered call writing. Naked option writing and spreads are not permitted
- Canada Revenue Agency requires you to convert your RSP to a RRIF at age 71
It is advisable to consult Canada Revenue Agency for specific issues regarding your registered account.
Scotia Retirement Reality Check
Find out how well your current savings and future contributions will provide for your retirement and learn how to address potential shortfalls.
Scotia RSP Catch-Up Loan Calculator
Retirement Savings Accounts
Introduction to: Retirement Savings Accounts
Below is a general description of our registered accounts. This is provided to you for informational purposes only and is not intended to be and should not be construed as tax advice of any kind. Scotia iTRADE does not provide investment advice or recommendations of any kind, including tax advice. Individual circumstances will influence your investment decisions and you should consult with your own tax advisor.
U.S.-Friendly RRSP Account Service
Tired of paying retail foreign exchange “spread” on trades in U.S. securities in your Canadian dollar RRSP? Now you don’t have to thanks to our Scotia iTRADE U.S.-Friendly RRSP.
Registered Retirement Savings Plan (RRSP)
Investing in an RRSP can be a tax-efficient way to help you save for your retirement.
When you contribute to an RRSP you can defer your tax payments on the money you invest until you retire. Once you turn 71, you are required to withdraw your savings or transfer them to a Registered Retirement Income Fund (RRIF), or purchase an annuity.
Spousal Registered Retirement Savings Plan Accounts
Contributions you make to a spousal or common-law partner RRSP reduce your RRSP deduction limit. The total amount you can deduct for contributions you make to your spouse’s RRSP or common-law partner’s RRSP and your RRSP cannot be more than your RRSP deduction limit.
If you cannot contribute to your RRSP because of your age, you can still contribute to your spouse’s RRSP or common-law partner’s RRSP until the end of the year he or she turns 71
Tax-Free Savings Accounts (TFSA)
Scotia iTRADE® offers the Tax-Free Savings Account (TFSA). Whether you are saving for a new home, a family vacation, or investing for retirement, the TFSA can help you meet your financial goals. A TFSA is a flexible investment account that allows you to invest your money and withdraw your funds for any reason.
Main features and benefits
- Contribute up to $5,000 each year to a TFSA, regardless of your income.
- Invest in a wide range of investment vehicles, including stocks, bonds, mutual funds, and cash.
- TFSA contributions are not tax-deductible, but the investment income you earn on eligible investments is tax-free, even when you make a withdrawal.
- If you do not contribute the maximum amount, your unused contribution room can be carried forward to any future year. If you contribute more than the maximum amount, your excess contributions will be subject to a penalty tax of one percent per month. You can withdraw funds from your TFSA for any reason, and your withdrawals are tax-free. When you withdraw funds from your account, the withdrawal amount will be added to your contribution limit the following year, which means you do not lose your contribution room when you make a withdrawal.
You are responsible for determining whether your investment is TFSA eligible. Conditions may apply.
For more information, visit the Government of Canada TFSA website: http://www.tfsa.gc.ca/
Registered Education Savings Plans (RESP)
A Registered Education Savings Plan (RESP) is a special plan that helps you save for a child’s studies after high school. Over the years, you put money into the plan and invest it so it will grow.
When you open an RESP, you name someone who will use the money for their education. You can name a child, a grandchild, or any other family member. In some cases, you may be able to name yourself or a friend. The person you name must be a Canadian resident.
The Government of Canada will also put money into the RESP as a grant if your contributing money for a child under the age of 17. Getting a grant is like getting free money towards education. The grants stop at the end of the year when the child turns 17.
Retirement Income Accounts
Introduction to: Retirement Income Accounts
Below is a general description of our income accounts. This is provided to you for informational purposes only and is not intended to be and should not be construed as tax advice of any kind. Scotia iTRADE does not provide investment advice or recommendations of any kind, including tax advice. Individual circumstances will influence your investment decisions and you should consult with your own tax advisor.
Registered Retirement Income Funds (RRIF)
A Registered Retirement Income Fund (RRIF) provides you with a set yearly income (minimum required) – determined by you to suit your goals, once you turn 71. Similar to an RRSP, your investments can compound tax-free as long as they remain in your RRIF.
With a self-directed RRIF, you can choose the investments that best suit your retirement objectives. We offer a wide selection of fixed income and mutual fund investment alternatives to help you with your investing and trading needs. There is no annual account administration fee for a RRIF account.
Life Income Funds (LIF’s)
A Life Income Fund (LIF) offers a more flexible alternative to a life annuity for the money that you and your employer have contributed to a pension plan on your behalf. You may transfer your pension funds to a Locked-in Retirement Account (LIRA) at age 55 in most provinces. A LIF will turn your funds into flexible income until the end of the year you turn 80 (except in Quebec, New Brunswick, Nova Scotia, Alberta, Saskatchewan, Manitoba and British Columbia where a LIF has no maximum age), at which time you must purchase a life annuity.
For more information, visit the Government of Canada website
Locked-in Retirement Income Funds (LRIFs)
A Locked-in Retirement Income Fund (LRIF) is similar to a LIF, with the exception that funds do not have to be converted to a life annuity at age 80.
Locked-in Retirement Accounts or Locked-in RSP (LIRA/LRSP)
Legislation governing employer-sponsored pension plans generally allows for “portability” of pension rights. This allows an employee who is a member of a registered pension plan and, who is entitled to a deferred pension benefit, terminates employment with the pension plan sponsor/employer, he or she can request the transfer of the accrued value of the deferred pension benefit to a Locked-In RRSP (LIRA).
A LIRA may differ depending on the province in which the pension plan is administered (Federally/Provincially).
A LIRA or locked-in RRSP is similar to an ordinary RRSP, except that it is governed by a “locking-in” agreement which ensures that the transferred pension funds and the subsequent earnings are used to provide periodic retirement income. In other words, it cannot be cashed-in or withdrawn in a lump sum before the specified retirement age.
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