Alternative strategies for tax sheltered financial planning

RRSP for retirement accumulation

As individuals ages throughout their 50s and 60s and approach their retirement years, their focus on savings shifts towards ensuring a comfortable and secure retirement. For someone like Andrew, lets say in his 60s, the emphasis will be on accumulating larger amounts of savings, which will be drawn upon annually. The fundamental principles of saving remain the same, but the amounts involved are significantly higher. Andrew can opt to invest in an RRSP or use a TFSA/RRSP shuttle to maximize his savings, but he needs to keep in mind that larger contributions will generate more re-contribution credits. Additionally, Andrew can receive an annual tax refund after deducting non-workplace RRSP contributions when filing his tax return. If he channels these funds through a TFSA, he can boost the expected TFSA re-contribution credit.
 

RESP for son’s education

Andrew now has a son named Ben, and he is looking to catch up on contributions to his son, Bens RESP, which he set up when Ben was younger. Andrew plans to deposit $5,000 annually for the next seven years, using carryforward of past unused room, to claim the maximum Canada education savings grant (CESG), which matches 20% of annual RESP contributions. By routing through a TFSA, Andrew can delay some of the CESG, but it will result in additional TFSA balance or contribution room. Once Ben is enrolled in a qualifying post-secondary program, personal RESP contributions can be withdrawn tax-free and routed back to Andrews TFSA. Additionally, some of those refunded contributions could go to the TFSA opened by Ben, who started getting TFSA room at age 18.

Alternative strategies to maximize your use of tax sheltered planning

The TFSA is a flexible and versatile financial tool that can be used in conjunction with other tax-sheltered plans. Unlike other plans, the TFSA's contribution room operates in both directions and includes unused room from previous years and withdrawals made in the preceding year. This presents an opportunity for the TFSA to enhance the benefits of other plans and vice versa. The current annual limit for the TFSA is $7,000.