Invesco Canada blog

Insights, commentary and investing expertise

Locked-in plans: Types of plans and unlocking options

July 22, 2020
Subject | Tax & Estate

Picking up from last month’s blog post, let’s continue our look at locked-in plans. Similar to Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs), locked-in plans also consist of pre-retirement plans and post-retirement plans. In addition, specific rules relate to unlocking amounts from these plans.


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Locked-in plans: understanding the basics

June 23, 2020
Subject | Tax & Estate

This is a three-part series focused on locked-in plans. In this series, you’ll learn the basics to help clients with these less-understood plans, explore pre-retirement and post-retirement plans and unlocking options, and get an overview of issues surrounding beneficiaries and creditors. Let’s first understand the basics in this part.


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Planning strategies for Registered Retirement Income Funds

April 15, 2020
Subject | Tax & Estate

The 25 per cent reduction in mandatory Registered Retirement Income Fund (RRIF) minimums for 2020 was one of a handful of tax relief measures the Canadian federal government implemented as part of its COVID-19 economic stimulus. The government has made similar changes in the past, with the RRIF minimums temporarily reduced by 25 per cent in 2008 amid the global financial crisis. RRIF minimums also came into focus in 2015, with the government lowering the prescribed factors it uses to calculate minimum withdrawals. Reducing RRIF minimums is aimed at increasing financial longevity for individuals in retirement who are living longer. The government has also changed the age at which Registered Retirement Savings Plans (RRSPs) mature several times over the years. Originally set at age 71, it changed to age 69 in 1996 and changed back to age 71 in 2007.


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Still not sure about RRSP vs. TFSA? Here’s how to use both

February 19, 2020
Subject | Tax & Estate

Learn how to maximize long-term tax benefits using tax-sheltered or tax-deferred registered plans.
One of the biggest benefits of registered plans in Canada is the tax-deferral opportunity on the compound growth inside the plans. In other words, registered plans generally allow investors to avoid the periodic tax on investment income generated; non-registered plans, in contrast, expose investors to annual taxation of income distributions. Without the annual “tax-drag,” investments in registered plans can grow faster than investments in non-registered plans. Given that, which registered plan is best to use? Here are key factors to consider when deciding whether to invest in a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA).
RRSP contributions are deductible against income, and RRSP redemptions are 100% taxable as income. TFSA contributions are made with after-tax money, and TFSA withdrawals are tax-free. Funds grow inside both plans on a tax-deferred basis.
RRSPs and TFSAs are, in fact, designed to be tax neutral, assuming a constant marginal tax rate (MTR). When an investor has a constant MTR throughout his or her working and retirement years, there should be no difference between an RRSP and a TFSA in net after-tax income.


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