Sign up for our
Tip of the Week
We hear so much about RRSP’s in February. In fact, there is talk that we are now in RRSP season, which is misleading. Of course, you can contribute funds to your RRSP at any time in the year as long as you have contribution room. The reason February is referred to as RRSP season is that if you want to deduct a contribution on your 2018 tax return you only have until March 1 of 2019 to make this contribution. Procrastinators only start thinking about RRSPS towards the middle of February. My recommendation is that you put your retirement funds into a Tax Free Savings Account rather than an RRSP.
I have written lots about RRSP and TFSA rules and so have lots of other people, but the basic deal is that money contributed to a TFSA does not create a tax deduction, therefore no tax is payable when the funds are removed. The RRSP does create a deduction and therefore the funds are taxable when removed. Because the Tax Free Savings Account is not a deduction on a tax return you don’t hear as much about it in February.
However, there is TFSA news. The limit has been increased to $6,000 for 2019 from $5,500 in 2018. So if you can resist the RRSP hype and put your money in TFSA you have a larger limit than you did.