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Let’s talk about…plan types

It’s important that you put your money where it makes the most sense for you. Whether you need a tax-sheltered account, a non-registered plan or a combination of both, ivari can meet your needs. Segregated funds contracts from ivari are available for registration as various plan types.*(1)

Tax-Free Savings Account (TFSA)

The TFSA program began in 2009 and under proposed legislation, the annual TFSA dollar limit, as of 2015, is $10,000.

TFSAs offer a great way to save, tax-sheltered, for any financial goal, whether it's for a long-term goal like your retirement, or short-term goal like that dream vacation or a new family car.

Key features of a TFSA:

  • Tax-free growth
  • Flexibility to contribute and make withdrawals
  • Save for short- or long-term goals
  • No tax on withdrawals
  • Any amount withdrawn can be re-contributed in future years
  • Withdrawals are not considered income as they do not affect your eligibility for income-tested government benefits or tax credits
  • Can hold many of the same investments as RRSPs

For more details about TFSAs, visit the Canada Revenue Agency website or talk to your financial advisor.

Registered Retirement Savings Plans (RRSP)

An RRSP provides tax benefits that can help you to save for your retirement. RRSPs may reduce your taxes in up to three ways:

  • Contributions to RRSPs, up to predetermined limits, may be deducted from your income before calculating income tax due.
  • Income earned within the RRSP (interest, corporate dividends, trust distributions, capital gains) is not taxed until money is withdrawn from the plan, allowing the plan to grow faster than the same investments would grow if they were held outside the plan and were thus subject to tax.
  • Money may be withdrawn from an RRSP during the years when you are in a lower income-tax bracket due to reduced income i.e. retirement. The money withdrawn will be taxed, but at your current tax rate, which could be lower that your tax rate when you earned the money.

Non-registered Plans

A non-registered plan allows you to invest your money in much the same way as you would with a Tax-Free Savings Account. However, because this plan is non-registered, it does not provide any tax-deferral benefits and it has no contribution limits.

Registered Retirement Income Funds (RRIF)

A RRIF is a tax-deferred retirement plan that you may use to generate income from the savings accumulated under your Registered Retirement Savings Plan. As with an RRSP, an RRIF is registered with the Canada Revenue Agency.

The option exists to convert an RRSP into an RRIF anytime on or before the end of the year in which you turn 71. It is mandatory to either withdraw all funds from your RRSP plan or convert your RRSP to an RRIF or life annuity by the end of the year in which you turn 71.

Investments held inside an RRIF grow in a tax-deferred manner just as with an RRSP, but there are some differences. For example, with an RRIF, no further contributions may be made and minimum withdrawals are required. These minimums change annually, based on your age and total value of the RRIF at the beginning of the year. Your advisor can provide further information.

Life Income Fund (LIF)

A (LIF) is similar to an RRIF but for funds that have been contributed through a pension plan. Money held within a LIF is highly regulated and there is a set minimum and maximum amount you may withdraw during any calendar year.

Locked-in Retirement Account (LIRA)

When you transfer assets from a registered pension plan (RPP), a defined contribution pension plan, or the commuted value of a defined benefit pension plan sponsored by a former employer, the assets must go into a LIRA*(1). These funds are sheltered much like an RRSP but are locked in and not accessible†(2) until the account is converted to a locked-in payout plan‡(3) or an eligible life annuity. You may need to reach a certain age, based on the applicable pension legislation, before the assets can be converted to a locked-in payout plan‡(3) or an eligible life annuity. By the end of the year that you turn 71, you are required to convert your locked-in accumulation plan to an eligible life annuity and/or locked-in payout plan.

Also note that once a plan is converted to a locked-in accumulation plan, you cannot make further contributions to it.

*(1) Under the pension laws of certain provinces, a LIRA is sometimes referred to as a Locked-in RSP (LRSP) or a Restricted LRSP. back

†(2) You may be able to withdraw funds from a locked-in plan under special circumstances such as financial hardship, small account value and shortened life expectancy (based on pension legislation which varies by jurisdiction). back

‡(3) A Life Income Fund or a Locked-in Retirement Income Fund (LRIF) or Restricted LIF or Prescribed RIF (PRIF) depending on the applicable pension legislation. back