Starting to invest in Canada? Here are your account options…

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Investing in Canada is very popular, both in domestic and international markets. Canada has a well-developed and stable economy, strong financial markets, and many investment opportunities. In Canada, there are several popular types of investment accounts that individuals use to grow their wealth. Here are some of the most common ones:

Registered Retirement Savings Plan (RRSP)

An RRSP is a tax-advantaged account designed for long-term retirement savings. Contributions made to an RRSP are tax-deductible, and any investment growth is tax-deferred until withdrawal. However, withdrawals are taxed as income.

  • You can contribute 18% of your earned income in the previous year.
  • The total annual RRSP limit (for 2022, the annual limit is $29,210)

Tax-Free Savings Account (TFSA)

A TFSA is a versatile investment account that allows individuals to contribute after-tax money, and any investment growth is tax-free. Withdrawals from a TFSA are also tax-free and can be made at any time for any purpose.

  • The annual TFSA dollar limit for the year 2023 is $6,500 (which is $500 more than it was in 2022
  • Contributions to a TFSA are not deductible for income tax purposes although it is for capital gains

Registered Education Savings Plan (RESP)

An RESP is specifically designed to save for a child’s post-secondary education. Contributions are not tax-deductible, but the investment growth is tax-deferred. The government also provides grants, such as the Canada Education Savings Grant (CESG), to help boost savings in an RESP.

  • The lifetime limit on all contributions that can be made to all RESPs is $50,000
  • Anyone over age 18 with a valid social insurance number can open an RESP

Non-Registered Investment Account

This is a standard investment account that doesn’t offer any specific tax advantages. Contributions are made with after-tax money, and investment growth is subject to capital gains taxes. However, non-registered accounts offer flexibility, as there are no contribution limits or restrictions on withdrawals.

  • You can invest in various financial products including mutual funds, exchange-traded funds, stocks and interst paying bonds.
  • You get the most flexibility as you can buy and sell investments to contribute and withdraw as much as you want easily.

Pension Plans

Many Canadians also participate in workplace pension plans, which are employer-sponsored retirement savings vehicles. These plans often include defined contribution plans or defined benefit plans, where both the employee and the employer makes contributions, and the funds are invested to provide retirement income.

  • Candian pension plans are spit between the Canada Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Supplement (GIS).

Registered Disability Savings Plan (RDSP)

An RDSP is a savings plan designed for individuals with disabilities. Contributions are not tax-deductible, but investment growth is tax-deferred. The government also provides grants and bonds to assist with long-term savings for individuals with disabilities.

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