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RRSP Season is Over…Now What?
Posted on March 3, 2010 at 5:27 pm
Filed Under Financial Planning, Investment Planning, Mutual Funds
As many Canadians have become used too, the March 1st deadline is officially come and gone.
The primary question many of our clients are asking us is “What’s the best way to use my available cash flow now that my RRSP is maxed out for the year?” One of the most obvious and natural answers is to take full advantage of the Tax Free Savings Account that the Government “gifted” us on January 1st, 2009.
If you haven’t used up your room entirely (you have contribution room of $5,000 from 2009 and $5,000 for 2010), then we suggest a simple yet effective monthly investment. If you break down the $5,000 available per year, that works out to approximately $416 per month.
The real beauty of the TFSA is the fact that your money is always 100% liquid and accessible at any point, and you never pay taxes on withdrawal, regardless of how much you’ve grown your account.
You’re Take Away: Simply put, you won’t lose if you take whatever cash flow you have available and begin to invest that in a TFSA every month. However, it amazes us how many of us don’t realize that you can invest in stocks, mutual funds, high interest savings accounts and many other investment vehicles much like your RRSP. Depending on your risk profile, time line and realistic expectations, it is highly possible that you should and will want to look at investment choices that have the potential to earn you a larger return then your basic bank is promoting.
After all, if you do happen to hold on to this investment without accessing it for a few years, your growth could be substantial and be withdrawn completely tax free. That, and you can always use your TFSA account to transfer money to your RRSP during next year’s RRSP season if you’re running low on cash at the time.
Until next week, have a wonderful Wednesday!
Chris and Elisseos
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