A new year means new financial limits.

A new year means new financial limits.

Here’s a list of data for 2019 

Pension and RRSP contribution limits

  • The new limit for RRSPs for 2019 is 18% of the previous year’s earned income or $26,500 whichever is lower less the Pension Adjustment (PA).
  • The limit for Deferred Profit Sharing Plans is $13,615
  • The limit for Defined Contribution Pensions is $27,230

Remember that contributions made in January and February of 2019 can be used as a tax deduction for the 2018 tax year.

Tax YearIncome fromRRSP Maximum Limit

TFSA limits

  • The TFSA limit for 2019 is $6,000.
  • The cumulative limit since 2009 is $63,500

TFSA Limits for past years

YearAnnual LimitCumulative Limit

Canada Pension Plan (CPP)

Lots of changes are happening with CPP but here’s some of the most important planning data.

  • Yearly Maximum Pensionable Earning (YMPE) – $57,400
  • Maximum CPP Retirement Benefit – $1154.58 per month
  • Maximum CPP Disability benefit –  $1362.30 per month
  • Maximum CPP Survivors Benefit
    • Under age 65 – $626.30
    • Over age 65 – $692.75

Reduction of CPP for early benefit – 0.6% for every month prior to age 65.  At age 60, the reduction is 36%.

CPP rates for past years:


Old Age Security (OAS)

  • Maximum OAS – $586.66 per month
  • The OAS Clawback (recovery) starts at $77,580 of income.  At $125,696 of income OAS will be fully clawed back.

OAS rates for past years:

YearMaximum Monthly BenefitMaximum Annual Benefit

New Federal Tax Brackets

For 2018, the tax rates have changed.

Lower Income limitUpper Income limitMarginal Rate Rate

Remember these rates do not include provincial tax. For new provincial rates, visit the CRA site.

Helping you understand…Part 2

Helping you understand…Part 2

You needed to save and invest for retirement, so you open an RRSP and contributed as much as you can each year.

Sure, the saving part is tough. And, of course, investing always had its challenges. But at least, we all know that an RRSP is the easiest way to invest for our future. We do this because government advises us that we should.

Then in 2009, along came the TFSA – tax-free savings account. This was started by the government to give those who had maxed out their RRSP contributions another place to invest. But did they really need a place to put another $5,000? No! But it was a government handout during an election campaign to serve the 4% of the population that wanted more room in their investment portfolio.

Most of the population are probably going to have to prioritize how they invest for their future. They will have to figure out which vehicle is right for them to focus their investment dollars. When you make an RRSP contribution, you get to deduct that amount from your taxable income. The investments inside your RRSP grows on a tax-deferred basis as long as they stay in the plan. Meaning when money is withdrawn directly from the RRSP, or from the registered retirement income fund (RRIF), or an Annuity to which the RRSP has been converted will be taxable.

Let’s say you have invested your money and your RRSP has grown to $1,000,000, that’s a nice size portfolio. You have worked hard to establish that piece of your financial security for retirement. But did you know that you also have a partner – the government – who is waiting patiently for their share!  As we stated above when you start to withdraw on your investment you will be taxed at the rate of your tax bracket.

A TFSA is the mirror image of an RRSP. Although you contribute after-tax dollars. So you don’t get a deduction for your contribution. But once the money is in the plan, it not only grows free of tax but also comes out free of tax. No tax is ever paid on this investment!

So why are we all not investing in a TFSA? There is definitely a circumstance that allows for either investment, you have to know which one will suit you best from a financial standpoint.

To help you understand the federal government introduced TFSAs, and created Chart 1:

Pre-tax Income $1,000 $1,000
Tax $ 400 N/A
Net contribution $ 600 $1,000
Value 20 years later @ 6% growth $1,924 $3,207
Tax upon withdrawal (40%*) N/A $1,283
Net withdrawal $1,924 $1,924
* The marginal tax rate — the rate of tax charged on the last dollar of income

This chart shows how a TFSA contribution is made with after-tax dollars while withdrawals are tax-free. And an RRSP contribution is made with pre-tax dollars  while withdrawals are taxable.

The chart also demonstrates that if you are in the same tax bracket when  you contribute and nothing changes and you remain in the same tax bracket at the time of withdrawal, then TFSAs and RRSPs work out to be the same. This is really simplified math and generally not the case for many investors. But it does show how these investments work in  its easiest form.

What you should know is if your tax bracket is lower at the time of withdrawal than at the time of contribution, the RRSP will win. But, if your tax bracket is higher at the time of withdrawal than at the time of contribution, the TFSA will win. The fluctuation in tax brackets is the tricky part; the perfect scenario is to be in a lower tax bracket during your retirement years.

Most of us contribute to RRSPs with after-tax savings and then spend the refund. We talked about this before in another article and it is your money to spend. Although if you invest that refund in yourself what would happen?


See the Chart 2 below:

Contributed after-tax savings $1,000 $1,000
Value 20 years later @ 6% growth $3,207 $3,207
Tax upon withdrawal (40%) N/A $1,283
Net withdrawal $3,207 $1,924

Now that’s a savings but remember this was after tax money that came from a refund and   was deposited into savings… yes, it was free money from your tax return and the initial investment into an RRSP. This shows how to use tax-free money (your refund) to your advantage keeping it tax-free moving forward.

So which investment is right for you?

TFSAs are very flexible. You can take money out of a TFSA at any time and then put it back in future years. We see this vehicle as investment portfolio for someone who is investing $5,000 or less into his or her plan a year. In other words, if you are in a low tax bracket then you may be better off with TFSA because you are not benefiting from the tax deduction.  A TFSA will be more fitting for your situation and you will not have to worry about being hit by the taxmen at retirement.

The RRSP investment is for the person who wants to lower their taxable income and is trying to invest 10% or more of their earned income into a retirement plan. As stated above the money will grow tax deferred within the RRSP until the funds are withdrawn. If you receive a tax refund that money can be used to build an alternative investment portfolio. As we have seen from chart 2 above, take your return and invest it into a TFSA you will be further ahead in the future. That alternative investment will grow tax-free and will not be taxed on withdrawal.

There is no wrong or right answer on which way to go when investing for retirement. The key is to have a plan moving forward and to stick with that strategy so that you can create a solid financial plan.

Many Canadians who are using TFSAs as retirement-savings vehicles are going to have trouble avoiding the temptation to withdraw from their plans. Many will rationalize the need to withdraw from their future retirement savings for the pleasure of spending it on something they want now. With an RRSP, the threat of paying tax on your withdrawal is a deterrent as no one wants to pay tax to the government so they can buy that must have item. Retirement planning will require some restraint and understanding when using a TFSA and savings vehicle.

Finally, some advice that will serve you well:

  • If you choose to invest in RRSPs, don’t spend your refund; Invest in yourself!
  • If you choose to invest in TFSAs, don’t spend your TFSA;
  • Whatever investment you choose, save more than you are today by trying to increase your investment dollar on a yearly basis!

Above are ideas, which may help you decide which plan is right for you, as always we at Henley Financial & Wealth Management are here to help.

You may also contact us at the following Info@henleyfinancial.ca  with any questions or thoughts you may have regarding investing in your future.


Who Should You Vote For? Be informed so you can vote on October 19th!

Who Should You Vote For? Be informed so you can vote on October 19th!

So while I was looking for answers on who I should vote for… I came across this article that breaks down the promises:

Campaign promises that affect your personal finances

Where the parties stand on taxes, student debt, pensions & more

by MoneySense staff
October 13th, 2015
We’re in the final week of the federal election campaign and all three major political party leaders have finally unveiled their full campaign platforms. Here’s an overview of what NDP leader Tom Mulcair, Liberal leader Justin Trudeau and Conservative leader Stephen Harper have promised as it relates to your personal finances.

NDP: Cancel income splitting for families with kids under the age of 18 but keep it for seniors; eliminate the CEO stock option loophole that allows wealthy CEOs to avoid taxes on 50% of income received from cashing in company stock (with proceeds invested into eliminating child poverty); increase investment in the Working Income Tax Benefit (WITB) by 15% to further support working Canadians who live below the poverty line; introduce income averaging for artists.

Liberals: Cut the middle income tax bracket from 22% to 20.5% for Canadians earning between $44,700 and $89,401 a year, amounting to savings of $670 a year (or $1,340 for a two-income household); create a new tax bracket of 33% for those earning $200,000 a year or more; reduce Employment Insurance (EI) premiums to $1.65 per $100; have the Canada Revenue Agency (CRA) contact people who have tax benefits but aren’t collecting them; cancel income splitting for families but keep it for seniors.

Conservatives: Introduce a “tax lock” plan to prohibit federal income tax and sales tax hikes along with increases to payroll taxes such as EI premiums for the next four years; cut EI premiums in 2017 from $1.88 to $1.49 per $100; phase in a new $2,000 Single Seniors Tax Credit, providing tax relief of up to $300 a year for seniors with pensions starting in January 2017; increase the Child Care Expense Deduction by $1,000 for children under age 7 to $8,000, to $5,000 for kids ages 7 to 16 and to $11,000 for children with disabilities.

Student Debt
NDP: Phase out interest on all federal student loans over the next seven years, saving students up to $4,000 in interest costs and boost funding for the Canada Student Grants program for low- and middle-income students and/or students with dependents by $250 million over four years.

Liberals: Increase the maximum Canada Student Grant to $3,000 per year for full-time students and to $1,800 per year for part-time students; increase the income thresholds for Canada Student Grant eligibility, giving more students access to the program; cancel existing textbook tax credits; eliminate the need for graduates to repay their student loans until they are earning at least $25,000 per year; invest $50 million in additional annual support to the Post-Secondary Student Support Program for Indigenous students attending post-secondary school.

Conservatives: Eliminate the income threshold used to assess the Canada Student Loans Program, so that students who work and earn money while studying won’t be denied access to the program for that reason; reduce the expected parental contribution amount to increase loan accessibility to approximately 92,000 students across Canada; expand the number of low- and middle-income students who are eligible for the Canada Student Grant program by making these grants applicable to short-term, vocational programs; increase the maximum annual grant for low- and middle-income families from $3,500 to $4,000.

NDP: Introduce a green home energy program to help retrofit at least 50,000 homes and apartment buildings making them more efficient and lowering energy bills; create 365,000 affordable housing units across Canada; mandate the Canada Mortgage and Housing Corporation to provide grants and loans to construct at least 10,000 affordable and market rental units, with any revenues to be reinvested back into rental housing supports.

Liberals: Start a new, 10-year investment in social housing infrastructure, prioritizing affordable housing and seniors’ facilities (including building more units and refurbishing existing units); encourage the construction of new rental housing by removing all GST on new capital investments in affordable rental housing; loosening the existing qualification rules for the Home Buyers’ Plan to allow more Canadians affected by sudden and significant life changes to access their RRSP savings for a down payment; review escalating home prices in high-priced markets, including Toronto and Vancouver, and review all policy tools that could keep homeownership within reach for more Canadians.

Conservatives: Establish a new, permanent Home Renovation Tax Credit which will allow homeowners a tax credit on up to $5,000 per year on home renovations. Increase the first-time Home Buyers’ Plan from $25,000 to $35,000 per person with a goal of more than 700,000 new homeowners by 2020.

Child Care
NDP: Create 1 million new child care spaces over the next eight years and cap their cost at $15 per day; add five weeks of parental leave for the second parent, extending the program to include same-sex couples and adoptive parents; doubling parental leave time for parents of multiples; provide regular EI access to parents who find themselves out of work after taking parental leave.

Liberals: Create a flexible parental benefits plan allowing parents to receive benefits in smaller blocks of time—for example, once every two weeks rather than once per month—and make it possible for parents to take a longer leave—up to 18 months when combined with maternity benefits, although at a lower benefit level; scrap the Universal Child Care Benefit for the wealthiest families, and instead introduce the Canada Child Benefit that will give the majority of families up to $2,500 more, tax-free, every year (typically for a family of four).

Conservatives: Increase parental leave to 18 months, allowing parents to take up to six months of additional unpaid leave; allow self-employed parents to earn money without impacting EI payments; offer choice between full parental leave EI payments for 35 weeks, or extend those payments, at a lesser rate, for up to a maximum of 61 weeks; women receiving EI maternity benefits will also be able to earn employment income under the Working While on Claim pilot project (this is currently permitted for those receiving EI parental benefits).

NDP: Reduce the annual Tax-Free Savings Account (TFSA) contribution limit from $10,000 to $5,500.

Liberals: Cut the TFSA contribution limit from $10,000 to $5,500 annually.

Conservatives: Double the Canada Savings Education Grant (CESG) contribution from 10 to 20 cents for middle-income families and from 20 to 40 cents for low-income families on the first $500 put into Registered Education Savings Plans (RESPs) each year, amounting to as much as $2,200 more per child in additional grant money.

NDP: Convene a first ministers’ meeting within six months of taking office to come up with a plan and a timetable for expanding the Canada and Quebec Pension Plans; scrap the Conservatives’ plan to gradually hike the age of eligibility for Old Age Security (OAS) benefits to 67 from 65 over six years starting in 2023; boost funding for the Guaranteed Income Supplement (GIS) by $400 million, a move aimed at lifting 200,000 of Canada’s poorest seniors out of poverty.

Liberals: Restore the eligibility age for OAS and GIS back to 65; introduce a new seniors price index to ensure benefits keep up with rising living costs; introduce a 10% boost to the GIS for single, low-income seniors; leave pension income splitting for seniors intact.

Conservatives: Support a voluntary expansion of CPP retirement benefits funded by workers, not employers.

Consumer Protection
NDP: Update the Consumer Protection Act to cap ATM fees at a maximum of 50 cents per withdrawal; ensure all Canadians have reasonable access to a no-frills credit card with an interest rate no more than 5% over prime; eliminate “pay-to-pay” by banks in which financial institutions charge their customers a fee for making payments on their mortgages, credit cards, or other loans; take action against abusive payday lenders; lower the fees that workers in Canada are forced to pay when sending money to their families abroad; direct the CRTC to crack down on excessive mobile roaming charges; create a Gasoline Ombudsperson to investigate complaints about practices in the gasoline market.

Liberals: The party has not included any specific measures related to consumer protection in its election platform.

Conservatives: Continue push for greater choice and lower fees in the wireless sector; grant the federal Competition Commissioner the authority to investigate the Canada-U.S. “price gap” on consumer goods; banning “pay-to-pay” practices.

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