While retirement savings provide exponential returns, it requires patience to see them reach a certain ceiling. There is also a possibility you might retire sooner because of unexpected events so your retirement planning should be very wise. We present a few alternatives to pension planning that will cushion the blow in your golden years of life.
Tax-Free Savings Amount
Your investment in a tax-free savings account is not subjected to tax. Any form of interest, capital again, or investment will not be taxed when you withdraw from TFSA. It is a registered savings plan that accommodates petty cash, mutual funds, stocks, and a Guaranteed Investment certificate, which you will learn about later on. Following are a few benefits of investing in TFSA outside of a pension:
- No withdrawal or principal ceiling.
- You can contribute to it as long as you shall live
- Money can be withdrawn without forgoing accrued interest or fines.
- There is no requirement to convert it to RRIF
- No deductions or tax implications.
Principal Protected Notes
Principal Protected Notes are similar to notes. By purchasing a PPN, you invest the principal amount through a lender, usually a bank. As the principal amount matures, you earn interest. However, the investment is guaranteed until the principal amount matures in at most 10 years. Regardless, the principal amount remains insured in the bank. If you decide to withdraw prematurely, you will encounter penalties:
- It will safeguard your principal amount.
- It is a secure form of capital investment.
- The returns are high compared to Guaranteed Investment Certificate.
Guaranteed Investment Certificate
Guaranteed Investment Certificates is a direct investment outside of the pension. The interest income is at a fixed rate. However, the longer you keep the acquisition, the higher the returns. Since the investment is very secure, the pensioners Canadians are pleased with the scheme. As a result, they can retire with significant funds in their name.
- There are no fees against acquiring Guaranteed Investment Certificates.
- You can convert the investment in RRIF and RRSP format
- Interest income is not taxable. However, the withdrawals are taxable in the same tax year.
- Guaranteed Investment Certificates can be submitted into a tax-free savings account. As a result, the interest income, deposits, and withdrawals are not taxed.
Retirement Savings Plan
A registered Retirement Savings Plan will hold cash reserves, jewelry, gold, silver, bonds, mutual fund bonds, equities, mortgage securities, and so much more. Other features include:
- All withdrawals are taxed. As a result, the RRSP holders are encouraged to maintain the investment to grow.
- The RRSP strategy reduces the amount of tax payable. The annual contribution figure to the RRSP is deducted from the taxable income in the same tax year. As a result, reducing your income tax.
- Furthermore, the tax benefit can be carried forward in the form of a tax rebate.
- Deduction due to RRSP will lower the tax slab. Taking too much out will adversely impact the investment pattern.
Mutual Funds
Lastly, you can invest in mutual funds. It will consistently increase your savings with its following benefits:
- You can invest with a tiny amount. In the future, you can amp the contribution as the pay increases.
- Mutual funds amalgamate your money with our investors. Thus, pooling it. The investment is diversified for higher returns, with the returns distributed proportionately.
- Professionals supervise mutual funds to maintain objectives, prospects, and risk management. Merrick Financial Inc. will offer an investment guide for optimum results.
- Mutual Funds are an excellent tool to tap into the investment sector without breathing excessive risks.
Let Us Guide You
Merrick Financial Inc. is present to assist you in achieving financial planning and investment dreams. Our fee for service financial planner services are for a range of clients. Contact us today via email, phone, or schedule a meeting by filling out the form online at our website.