Hi, I'm Kinson. Hi, I'm Edmond. Welcome to Novella Wealth Online Channel On this channel, we will have a new series of video helping newcomers and returnees answer some tax-savings and financial related questions In this first episode of "Novella PLAN AHEAD", we will talk about CPP RRSP and TFSA Kinson, for those who moved to Canada from Hong Kong When they were working in Hong Kong Would have participated in a retirement plan called MPF (Mandatory Provident Fund) And they wonder if there is something similar in Canada If I have to compare with Hong Kong's MPF There is a similar retirement plan here too Which is the “Canada Pension Plan” or CPP The plan is based on your employment (including self-employed) Your employer contributes a percentage of your earnings to the pension plan And you also contribute a percentage of your earnings to the pension plan You can start receiving your pension as early as age 60 But, I feel that people may be unwilling when You have no control over how your savings is managed Yes, it's like forcing me to save... But it is always good to save money for the future Actually, there is another "voluntary" retirement savings plan Which is RRSP ”Registered Retirement Savings Plan“ Everyone who has earned an income can contribute a certain amount each year 18% of your previous year's pre-tax earnings [or the amount set by CRA, whichever is less] The money saved in this plan and the investment profits obtained from it are temporarily exempt from tax Because Canadian tax rates are quite high Through this plan, you can save up to 30% to 40% in tax Why do so many people voluntarily save money in an RRSP The reason is simple Because you have to file taxes every year Generally speaking, all your income is taxable But the money you put in your RRSP won't count towards your income for the year To put it simply, let's say, Edmond If your annual salary is $50,000 Then your tax return is based on the $50,000 you earned However, let's say you put $5,000 in your RRSP account this year Simply put, this $5,000 will not be considered as your tax return this year (tax year) $50,000 minus $5,000, so your taxable income will only be $45,000 Which means you pay less tax When opening an RRSP account, be sure to indicate the "Beneficiary" For example, Kinson, if you open an RRSP account today You should write your wife (or spouse) as a Beneficiary The reason is when you pass away Your RRSP has a Spousal Rollover (tax-exempt spouse asset transfer), and the funds are transferred directly to your wife's RRSP account This is really important I have heard clients who May not have a spouse or partner, no person selected as a beneficiary And the client may just write "Estate" as beneficiary The problem is when you go through probate in Canada Which is what happens when you write “Estate” as beneficiary There will be probate fees and the probate process is time-consuming So I always suggest indicating a designated person Edmond, so what other benefits is there writing a spouse as beneficiary? I just mentioned that the money you put in your RRSP today doesn't count as taxable income But when you withdraw the money, it will be counted as your tax return income in the year you withdraw. And when someone pass away, their RRSP will also then be considered a withdrawal Will be included in the deceased's Final Tax Return But if the spouse is the beneficiary The funds in the deceased's RRSP account will be transferred directly into the RRSP account under the spouse's name Without tax Another problem is that Another thing to note, MPF or CPP requires annual contributions However, there will be a time limit for withdrawals Edmond, is there a withdrawal limit for RRSP As long as you have contribution room or money left in your RRSP Then you can make contributions and withdrawals at any time However, withdrawals will be treated as your income for your tax return for that year For RRSP, it is important to note that at age 71 Firstly, no more contributions; Secondly: your RRSP will be transferred to another registered account RRIF (Registered Retirement Income Fund) For this account, government has set a Minimum withdrawal amount as income Besides RRSP, some may also have heard about TFSA What is TFSA? TFSA (Tax-Free Savings Account) was implemented by the government in 2009 It is literally a tax-free savings There is an annual contribution room set for each resident Which is $6,000 The money that you put into TFSA Can be invested in eligible products such as Cash, guaranteed investment certificates (GICs), bonds, stocks, mutual funds... Any profits generated in the account (such as interest, capital gains, dividends, etc.) are tax-exempt Very good deal So TFSA and RRSP are both accounts to save money What do they have in common Why don't you talk about the similarities and I will talk about the differences Similarities between TFSA and RRSP Both when you invest in the account No need to pay tax Both accounts have beneficiary options Another similarity, they have a contribution limit each year Not however much you want RRSP contribution amount is based on your annual income And TFSA is set by the government each year What is the difference between RRSP and TFSA? The difference is that when you save money in an RRSP today That money is not counted towards your income for the year, you can get a tax deduction Simply put, it is "pre-tax" money On the other hand, there is no tax deduction for money put into TFSA It is what it is The difference is that for TFSA When you withdraw money, it is not regarded as taxable income no matter how much (that is, you will not have to pay tax) While RRSP withdrawals are treated as taxable income for that year I also thought of something You need to file tax return on RRSP But not for TFSA So what is the procedures in opening an account? Usually what you need to do is Your financial institution will ask you for Your photo ID and your SIN number (Social Insurance Number) SIN is used for tax purposes A unique number in Canada So when you open a registered account, these financial institutions The amount is reported to the government There will be a tax return document for your RRSP at the end of each year With this tax return It will then be used by your accountant for tax purposes But TFSA will not have a tax return document But how do I check my TFSA contribution limits You can login to your account on CRA website to check [Link in description box] Then you can check your remaining contribution room Some clients may ask, that I will have an RRSP quota if I immigrate to Canada with my family My wife doesn't have a job, can she save with an RRSP? Unfortunately, she can't contribute to a RRSP However, if you work Even when your other half does not have a job And you have contribution room left Then you can contribute to a "Spousal RRSP" Which is an RRSP under your spouse's name But contributions into it will be deducted from your income You have a tax advantage And your spouse also has own RRSP account The purpose is that When both of you retire Your income becomes low You can reduce taxes when you withdraw money from your RRSP For RRSP and TFSA There is a limit to the amount of saving contributions allowed In addition to these two options, if I want to save even some more money What other good options are there? In Canada, another way to save money with tax benefits is Via a life insurance policy Of course, this depends on each individual's situation If you don't know which account is better Which one is more beneficial for your situation Best to seek a professional's advice For example, if an individual Has a lot of budget I would recommend to maximize their RRSP and TFSA contributions And then utilize tax benefits under life insurance policies to increase savings It is always beneficial to have more retirement savings Of course, if you have a limited budget today It is best to consult with a professional Examine the range of options best for your investment And overall financial goals Most often When considering each case, besides your budget We will also look at client's other needs For example, for a family We need to consider each family member when planning for RRSP, TFSA, or insurance plans I believe you also handle many different client cases like this So some may ask which is better, and which is not good There is no single answer that says the best and the worst that applies to everyone's situation It really depends on the individual situation What suits your financial goals; What makes sense in your life How to maximize returns with the least amount of money This is where we come in to help In summary, today we have explained CPP, TFSA and RRSP Sounds easy But everyone's situation is different Edmond, what do you think our viewers should do? If you have any questions or want answers to your unique situation You can leave us a comment We will do our best to answer your questions We will make more content for you You can also book an appointment with us to talk more by clicking the link in description below Before you leave this video Like, Share, Subscribe Your support will motivate us to create more content for you See you soon again!
