GICs, TFSA, ANNUITIES
Tax Free Saving Account( TFSAs)
The Tax-Free Savings Account (TFSA) is an account that provides tax benefits for saving in Canada. It is a way of savings for individuals who are 18 years or older to set money aside, tax free, throughout their lifetime
You can contribute up to $5,500 annually to your TFSA. The TFSA will
always have a round limit to the nearest $500. Over contributions will be taxed as if they investment had been made in a non-registered account.
Investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn. Contributions to a TFSA are not deductible for income tax purposes, unlike contributions to a Registered Retirement Saving Plan(RRSP).
Eligible Investments. The eligible investments in a TFSA are roughly the
same as in an RRSP, except that a TFSA cannot hold income-producing
Carry Forward. Unused contribution room is carried forward indefinitely.
Withdrawals. Withdrawals can be made from a TFSA at any time. There are no tax consequences to withdrawals
INDIVIDUALVARIABLE INSURANCE CONTRACTS
Individual Variable Insurance Contract or Segregated funds is a large pool of money is invested in stocks, bonds, or other securities with the goal of growing the value of the entire pool. But segregated funds are actually structured as insurance contracts, so they have some benefits that mutual funds do not.
Open-Ended. Segregated funds are open-ended. Investors do not have to deal on a secondary market
Segregated funds can guarantee 75% to 100% of your contributions (minus withdrawals) when the contract matures, or on your death. The value of the contract is not guaranteed at other times.
Reset Options Segregated Funds allow an investor to reset their guarantees. Resets allow the investor to lock in gains, increasing guarantees based on growth in the investment. Not all insurers offer resets
Potential creditor protection
If there is a named beneficiary, segregated funds are generally protected against seizure by creditors. This is one of the great advantage available to business owners and professionals who want to be protected against bankruptcy or unexpected lawsuit.
Annuities are contracts between investors and insurance companies. Annuities are a popular way to save for retirement because they can provide income. When we talk about investing for income, annuities are an excellent choice. Because the income is guaranteed and there is no market exposure, also it offers a higher income rate than many other guaranteed income products, with the tax advantages for non-registered funds. The income stream can be based on several factors.
There are different types of annuities that offer investors different interest rates and schedule of payments. Annuity benefits can be based on either a fixed term, or on the life of one or more Prescribed annuitants. Insurers are the only entity that can offer life annuities; other annuities are available through insurers, banks, or investment dealers.
Government Investment Certificates
GICs are secure investments that guarantee to preserve the principal. Investment earns interest, at either a fixed or a variable rate, or based on a pre-determined formula. GICs often form the foundation of a well-balanced portfolio.
- Security and safety—both your original investment and interest payments are guaranteed
- Competitive interest rates—guaranteed for the full term of the investment
- Flexible investment terms—ranging from one day to five years, and seven years and ten years
- Choice of interest payment frequencies e.g. monthly, annually
- Eligible for registered investment plans