At each stage of life, not only do your life goals change, but your financial focus changes as well. At the age of 25, budget may be your most important concern. At age 50, your tax strategy may dominate your thinking. Fortunately, greater knowledge of finances can allow people to make more informed choices.
So, before you move your next cash, there is an opportunity to test your financial knowledge. We hope this is an opportunity to learn and motivate you to apply your knowledge to your own financial scenarios with fresh eyes.
1) What percentage of your annual income can be contributed to a Registered Retirement Savings Plan (RRSP)?
a. There is no limit
18% of your income, with some exceptions (1)
C- 10% of your net worth
Investing in mutual funds and other investments under an RRSP can be a great way to benefit you and your family now and in the future. RRSP contributions can lower taxable income and may help contribute to an annual tax refund. With annual contributions over time, investments in an RRSP can provide a way to double savings to fund your retirement years. You can continue to contribute to the RRSP until the end of the calendar year when you reach the age of 71.
2) Exemption from main residence….?
a. Tax relief for seniors who sell their homes
B – Discount for those who help their children in their first home
C- Tax exemption for home renovations
D- Tax exemption from capital gains on a main residence
When you sell a property, any capital gains are taxed. This can be a huge burden for those selling real estate because the gains on real estate can be significant (especially in light of the current housing market). Fortunately, the Home Residence Waiver gives an exception for your primary residence or family home (under certain conditions). If you have more than one property, it is best to consult a financial advisor about how to manage the main residence exemption or other tax strategies.
3) How old must a child be to have a registered educational savings plan (RESP) in place?
a. He is one year old
B – He is 1 year old but younger if his brother has RESP
C – There is no minimum age as long as the child has a social insurance number
There is no minimum age as long as one parent has an RRSP
The fact that you can start contributing to RESP in the first year of a child’s life means that you have a number of years to contribute to your child’s education before he actually needs to use the funds. A Canadian Education Savings Scholarship is also available, up to a maximum of $500 per year (up to $7,200 in total). Annual contributions can be invested – they may accumulate over time and can offset future educational costs.
4) The most important advice a financial advisor can give you is:
a. Retirement Planning
B – TFSAs
c- Paying the child’s post-secondary education expenses
Dr.. All that is beyond
The typical family member might have their hands full to balance today’s needs with tomorrow’s plans. Oftentimes, it’s a matter of juggling short- and long-term goals: paying the bills, hiding money for a child’s education or even ensuring you’ll have an enjoyable retirement. A financial advisor can provide options about budgeting, saving, and planning your goals. With investing, a financial advisor can discuss your risk tolerance, time horizons, and financial goals to see which products are right for you.
5) The best way to calculate how much income you need for retirement is…?
a. Your highest income, less than 10% per year
B. 7% of your savings annually, multiplied by 25 years in retirement
c. It depends on the value of your home and when your children will be out
D – Depends on your personal situation and is linked to your retirement goals
Planning for retirement is perhaps one of life’s main goals: What you do with savings and investing in the first two-thirds of your life may influence the choices available to you in the last third. And your family, your money, your desires and your intentions are different from everyone else’s, something no standard formula can capture. For this reason, it may be best to consider looking for a financial planner who can help form a goal-based financial plan. It can take care of your current needs but also help you achieve your goals when you stop working.
6) When there is economic uncertainty, avoiding the stock market is the best way to keep your money safe in the long run.
During economic uncertainty, some investors may panic and liquidate their investments in hopes of avoiding a massive sell-off in the market. In a study, TD Asset Management suggests what can happen when investors try to time the market and are on the sidelines during periods of growth: If you miss 1% of the market’s best days between 1989 and 2019, your portfolio will provide significantly lower performance. You can read more about the power of investing.
7) When a parent transfers assets to an adult child by will, the child is taxed on the property they receive but not RRSPs or tax-exempt savings accounts (TFSAs) under the Canadian inheritance tax.
B. Incorrect: The beneficiary does not have to be a child
c. Incorrect: Artwork will also be taxed
D. Incorrect: There is no Canadian inheritance tax
It’s a tricky question but many Canadians may be unsure of how taxes will work when assets are transferred to the family members named in their will. While the beneficiaries do not pay taxes on any assets received, this does not mean that the taxes will not affect the estate. Anyone wishing to pass on an inheritance to their family will want to think about how they will organize their money, property, and other assets to mitigate taxes upon their death. These are things that a professional planner may be able to help you with.
8) Fact Check: At the age of 60, you should withdraw your investment from your TFSA account.
A: Yes, right
B- No, but you must withdraw 7% per year
c. No, there is no age limit when you need to withdraw funds
No, but you must do the entire withdrawal process by age 65
One valuable aspect about the TFSA is that there is no upper age limit when you must stop contributing. Plus, you’ll never lose your contribution space if you haven’t added to your TFSA account for one year. In fact, even if you make a withdrawal, that withdrawal amount will be added back to your TFSA contribution room at the beginning of the following year.
Financial literacy is a skill that can provide immediate benefits. Knowing how best to use registered accounts such as RRSPs, TFSAs, and RESPs can ease some anxiety about long-term financial goals such as retirement or saving for a child’s education. But bringing all of your financial responsibilities and desires together can be complicated: A discussion with a financial advisor can provide you with appropriate recommendations tailored to your unique situation.
1. Your annual contribution limit is tied to the amount you earn. For 2021, the RRSP contribution limit is 18% of the previous year’s earned income, up to a maximum of $27,830 (a number determined by the government each year), plus previous unused contribution room minus any pension adjustments.
Disclaimer: The information in this document is provided by TD Wealth and is for informational purposes only. The information was obtained from sources believed to be reliable. Charts and charts are for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Proprietary investment, tax or trading strategies must be evaluated in relation to each individual’s goals and risk tolerance.
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