- Taxable Savings
- This is an ordinary, taxable, savings account. There are no restrictions for deposits or withdrawals, but all earnings and capital gains are taxable. In addition, there is no tax deduction to any deposits to an ordinary taxable account.
- Tax Free Savings Account (TFSA)
- This is a savings account that allows Canadians 18 and older to save up to $5,000 per year in tax free. Withdrawals can be made at any time for any purpose and are tax free - including capital gains. For complete details of the how a TFSA works please see http://www.tfsa.gc.ca.
- Registered Retirement Savings Plan (RRSP)
- This is a savings account set up primarily for retirement savings. Contributions to a RRSP are generally tax deductible but withdrawals are taxed at your normal income tax rates. There are additional restrictions to how you can withdraw funds from this type of account. For complete details of the how a RRSP compares to a TFSA, please see
www.tfsa.gc.ca/tfsarrsp-eng.html.
- Starting balance
- Any existing balance for the accounts.
- New contributions
- Your periodic contribution. All contributions are assumed to happen at the beginning of the period.
- Years to contribute
- Number of years you plan on making contributions.
- Contribution frequency
- The frequency of your contributions. The options are weekly, every other week, twice monthly, monthly, quarterly, semi-annually or Annually. All contributions are assumed to be made at the beginning of the period.
- Annual rate of return
- This is the annual rate of return you expect from your investments after taxes. The actual rate of return is largely dependent on the type of investments you select. For example, for the last thirty years the average annual rate of return for the TSX is about 10%. Savings accounts at a bank or credit union may pay as little as 2% or less. It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment.
- Income tax rate
- Your marginal income tax rate. This is used to estimate the amount of tax you will pay on your RRSP and taxable account options.
- Compensate for tax-deduction
- If you check this box the calculator will assume contributions to the RRSP investment are tax deductible when they are made. The calculator will then increase the contribution amount for the RRSP investment by the amount required to make the net contribution equal to the investments that have contributions made on an after-tax basis.
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