Exploring long-term planning options with SISIP

Spencer Elliot, BA PFP, SISIP Financial – Financial Planner — Saving for your future is beneficial in theory yet daunting in practice. Starting somewhere is important. Below are two popular savings ‘vehicles’ intended for long-term savings:

Registered Savings Plan (RSP)

The Registered Savings Plan (RSP) is a tax-deferred investment account that allows you to grow your investments tax-free. You reduce your income tax by the amount you contribute to your RSP, likely receiving a tax credit at the beginning of the year. If you withdraw an amount from the RSP, either before or at retirement, that amount becomes taxable.

Your goal should be to contribute to the RSP when your income is high and withdraw when your income is low (such as during retirement), as you will be in a lower tax bracket and will not get taxed as much on it, if at all.

You can also invest your RSP in mutual funds, the Global Industry Classification Standard, and savings. Consult with your financial planner for the best option for you.

Tax-Free Savings Account (TFSA)

The Tax-Free Savings Account (TFSA) is an investment account that complements an RSP and pension, but it can be beneficial for saving for large purchases like a down payment for a house. It is not a tax-deferred account or a savings account, but you still get tax-free growth, and withdrawals are not taxable. Many retirees use this type of account for emergencies as accessing it will not affect their overall income tax payable at the end of the year.

Your financial situation should dictate which investment account to use, but most Canadians should take advantage of both savings plans. A financial plan will maximize not only your savings but your after-tax income at retirement.

Visit SISIP Financial to speak to one of our advisors. We are here to help you create budgets, develop a solid plan and stay on track to make your goals a reality.

We are located in the CANEX Building and by phone at (250) 363-3301.