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Guaranteed Investments

A term deposit is one of the safest ways to invest your money. It is a short term investment for a fixed amount of time. For a minimum deposit of $1,000 you can choose a term ranging from 30 to 364 days. A term deposit always comes with a fixed interest rate which is locked in and guaranteed not to change during the term of your investment. The interest rate offered is generally higher than keeping your money in a savings account and is paid to you when the term has matured.

A guaranteed Investment Certificate (GIC) is one of the safest ways to invest your money. It is a long term investment for a fixed amount of time. For a minimum deposit of $1,000 you can choose a term from one to five years. A GIC always comes with a fixed interest rate which is locked in and guaranteed not to change during the term of your investment. The interest rate offered is generally higher than a term deposit and is paid to you annually or when the term has matured.

A Tax-Free Savings Account (TFSA) is a registered savings plan available to Canadian residents 18 years and older with a valid Social Insurance Number. It allows your savings to grow without ever paying tax on the interest earned within your account. You can contribute a mix of savings and investments to your TSSFA, such as cash, GICs, stocks, bonds, and mutual funds. The Canada Revenue Agency sets the annual TFSA limit but if you have unused contribution room from previous years, you may be able to invest more.

The annual TFSA dollar limit for the years 2009, 2010, 2011 and 2012 was $5,000.

The annual TFSA dollar limit for the years 2013 and 2014 was $5,500.

The annual TFSA dollar limit for the year 2015 was $10,000.

The annual TFSA dollar limit for the year 2016 was $5,500.

The annual TFSA dollar limit for the year 2017 is $5,500.

The annual TFSA dollar limit for the year 2018 is $5,500.

The growth on your investment within a TFSA will not be taxed even when withdrawn from the plan. You can set up your TFSA in a number of different investment options, withdraw your funds at any time, and for any purpose.

A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s investments and attempt to produce capital gains and/or income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus. Depending on the stated objective of the fund, each will vary in regard to content and risk.

BCU Members have access to a wide range of mutual funds through BCU Wealth Management. For more information, visit www.bcuwm.com

Education

A Registered Education Savings Plan (RESP) is a tax-sheltered plan that helps you save for a child’s post-secondary education. The money you invest grows tax-deferred until the child enrolls in a qualifying post-secondary institution. The Canadian federal government provides additional financial contributions to your RESP in the form of grants. When a child withdraws from the RESP, income tax is applied only to the investment income and government grants. Income tax is not applied to the base contributions using your own funds. These amounts are taxed in the hands of the student, and this usually means the student pays little or no tax, because students typically fall into the lowest tax bracket while attending a post-secondary institution.

All contributions made by one or more subscriber into RESPs for a particular beneficiary may not exceed $50,000 during the beneficiary’s lifetime.

The federal government will give your child’s Registered Education Savings Plan (RESP) a boost by making contributions to your RESP through the Canada Education Savings Grant (CESG). Each year, the government will match your contribution by 20%, up to a maximum of $500 for each child. You need to contribute $2,500 a year to get the full grant of $500 each year. Your child can carry forward unused grant contribution room until they turn 17. The maximum contribution the federal government will make to your child’s RESP is $7,200.

Employment and Social Development Canada (ESDC) provides an additional amount of CESG to families who meet the income requirements. ESDC will pay an additional 20% on the first $500 to a child’s RESP if the family net income for the year of $45,916 or less. ESDC will also pay an additional 10% on the first $500 to a child’s RESP if the family has a net income for the year that is more than $45,916 but is less than $91,831.

The Canada Learning Bond (CLB) is an initial $500 the Government of Canada deposits into a Registered Education Savings Plan (RESP) to help you start saving for your child’s education after high school. Your child could also get $100 every year until age 15. In total, a child could receive up to $2,000 in an RESP. The money in an RESP can be used to pay for various expenses related to full-time or part-time studies in: apprenticeship programs, colleges, trade schools or universities. The CLB is available to children from low-income families who are born on or after January 1, 2004; are residents of Canada; and have a valid Social Insurance Number.

Retirement

A Registered Retirement Savings Plan (RRSP) is a savings plan that is registered with the Canadian Government with set maximum annual contribution limits. Contributions to your RRSP reduce your taxable income, which allows you to pay less tax now. Pre-tax money is placed into an RRSP and grows tax free until you withdraw it, at which time it is taxed at the marginal rate. The income you earn is sheltered from tax, allowing it to grow faster. By the time you retire and withdraw funds, you will likely be in a lower tax bracket.

To find out how much you can contribute check your Notice of Assessment from last year’s tax return to see how much you can contribute. You can also carry forward indefinitely any unused contributions from 1991. Catching up on unused contributions from previous years is made easier by taking advantage of a RRSP Loan.

For the 2018 taxation year, the RRSP contribution dollar limit is $26,230 and for the 2019 taxation year, the RRSP contribution limit is $26,500.

RRSP Contribution Deadline

RRSP contributions made during the first 60 days of 2018 may be claimed as a deduction from income for the 2017 taxation year. The deadline for 2017 contributions is March 1, 2018.

RRSP contributions received after March 1, 2018 are not eligible for deduction for the 2017 taxations year.

By contributing as early as possible, you can also benefit from the longer effects of compound interest. Regular monthly deposits make contributing to your RRSP so much easier by eliminating the need for lump sum contributions by the annual deadline within the first 60 days of the year.

A Registered Retirement Income Fund (RRIF) is a way to convert your retirement savings into retirement income. Instead of cashing in your RRSP and incurring a large tax burden, RRSPs can be converted to an RRIF which allows you to gradually withdraw your funds over time. You can convert your RRSP to a RRIF at any age, but The Canada Revenue Agency (CRA) requires that you make this conversion by the end of the calendar year in which you turn 71 years old. Start taking withdrawals the year after you open your RRIF. This can be any amount, as long as you meet the minimum annual withdrawal as set out by federal regulations. You will also need to report withdrawals as income on your tax returns. You pay tax on income as you receive it, and the remaining balance within your RRIF continues to generate tax-free interest until it is withdrawn.

A Life Income Fund (LIF) and the Locked-In Retirement Fund (LRIF) are types of Registered Retirement Income Funds (RRIF) that are used to hold pension funds and eventually payout retirement income. If you left a job where you had a pension plan, you may have transferred your pension entitlement to a LIF or LRIF, where it has been invested according to your directions. LIFs and LRIFs cannot be withdrawn in a lump sum and must be used in a manner that supports your retirement income for a lifetime.

At BCU Financial, your deposits are insured by the Deposit Insurance Corporation of Ontario (DICO). All insurable non-registered deposits are covered up to $250,000. Insurable deposits in registered accounts have unlimited deposit coverage. For more information visit the DICO web site at www.dico.com.

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