Investment Products

A workplace pension plan, the Canada Pension Plan (CPP) and Old Age Security (OAS) MAY be there for you to fall back on for income... but for many newly retired people, their income becomes very limited.

A Registered Retirement Savings Plan (RRSP) can hold a variety of different investments in your choice of mutual funds, segregated funds and/or Guaranteed Investment Certificates (GIC's).  An RRSP is attractive because any growth or income earned is tax-deferred as long as the funds stay in your RRSP.  However, when you redeem money, you have to pay tax on it.

With a Spousal RRSP (SP RSP), one spouse owns the account and the other spouse makes contributions.  When contributions are made, this triggers a tax deduction for the contributing spouse.  The account owner claims the income later in retirement.  This type of account can be beneficial when one spouse earns considerably more than the other by creating a more equal balance between incomes.  It can also prove to give couples an advantage if one partner has a work pension plan and the other does not. 

A Tax-Free Savings Account (TFSA) is like a regular savings account, however the main difference is that a TFSA can be treated like a savings account or an investment account.  

This type of account is attractive because you will not be taxed on what you earn within your TFSA (like interest, dividends and capital gains).  Furthermore, you can conveniently withdraw money from your TFSA at any time without having to pay taxes on it.  Just be aware ― there are specific rules in place to make sure you do not over-contribute, which may lead to surprise tax charges.  

Aside from applying for scholarships, bursaries and grants, a Registered Education Savings Plan (RESP) is a great way to save money for a child’s education.  There is a limit on the amount of money you can contribute each year, but if you get started early, you can still save a lot of money because yearly contributions can be made up to (and including) the year the child turns 17.  The Canadian government also pays a 20% education grant into the child’s RESP each year, which helps to save more!  Based on household income, the child may also be eligible to receive additional grants from the government.  

You can save your child from having to endure years of debt created by student loans with a carefully planned and funded RESP.

The Tax-Free First Home Savings Account (FHSA) is still in the design phase, but should be available for Canadians in 2023.  The government plans to make the FHSA available as of April 1st, however it will be rolling out at different times within the fund companies.

Per the design details outlined on the Canada.ca website, the FHSA will be a new registered savings plan for prospective first-time home buyers.  

With this account, you will be able to save $40,000 (lifetime limit) with an annual contribution limit of $8,000, tax-free.  The FHSA is designed so that your contributions will be tax-deductible, and when it is time to purchase your first home, your withdrawals (including investment income) will be non-taxable.

Your contribution room starts to accumulate only after you have made your first contribution, and the $8,000 annual contribution limit for 2023 will be maintained, providing you begin contributing to it in 2023.

There are more details about the design of the FHSA, which can be found on the Canada.ca website.

If a child is younger than 18, any investment activity on their behalf needs to be done through something called an “In Trust For” account (aka. ITF account).  Typically, this account is opened by a parent(s), guardian(s) or family member(s) but it can also be opened by a close family friend or other relation.  In any case, this type of account will be managed by the person who opens it until the child is 18.  When the child turns 18, the account can then be transferred into their own name. 

An RDSP is a savings plan intended to help save money for someone who is eligible for the disability tax credit (DTC).  This money will go toward their long-term financial security.

An RDSP is similar to an RRSP in that it is a tax-sheltered account.  This means the money in the account grows tax-free.  With an RDSP, the account holder may also enjoy substantial grants as long as the RDSP has been opened before they are 49 years old.

There are many rules and regulations to be aware of when it comes to tax implications or whether or not you can receive substantial grants, so please speak to a financial advisor.

A non-registered account is a general investment account that is flexible, offers tax benefits and has no contribution limit.  There are tax implications that can be created on these accounts and, like any other account, there are rules and regulations to consider, so it is best to work with a financial planner on your goals.

When you buy a mutual fund, your money is being pooled with other investors’ money to purchase a variety of investments, such as stocks, bonds or other products.  These funds are “open-ended”, which means the fund issues new units or shares as more people invest.  Because of this, you are able to invest in a wide range of investments for a relatively low cost.  Your share of the fund (usually measured in “units”) will increase or decrease in value depending on the performance of the assets held within the fund.

A mutual fund is managed by a professional with proven skills and expertise whose goal is to increase the overall value of the fund.  Fund managers create unique portfolios using a variety of investment products, and in some cases, they include products that may not be available to the public.  The fund manager will also make buy-and-sell decisions that are beneficial to the investor.  It is best to work with a financial advisor who works closely with fund managers.  Your advisor will work with your fund manager to discover optimal times for buying and selling.

A segregated fund is like a mutual fund but it is an insurance product that offers certain benefits that mutual funds do not.

First, when you invest in a segregated fund, 75% - 100% of the principle amount you invest is guaranteed to be returned to you no matter how well your investment performs.  In order to benefit from this guarantee, you have to hold your investment for a certain length of time (usually 10 years).  Also, some contracts may offer a guaranteed death benefit in the event you pass away.

Second, you can name a beneficiary with a segregated fund.  This is beneficial because the money you’ve invested will bypass probate and go directly to the beneficiary.

Finally, the money in your segregated fund may be protected against creditors in case of bankruptcy or an unexpected lawsuit.

A Guaranteed Investment Certificate (GIC) is a low-risk investment option most commonly issued by trust companies or banks.  Investing in a GIC means you invest a certain amount of money (called the “principal amount”) for a defined period of time and you are guaranteed a certain rate of interest on the money you put in.  This means that once your GIC matures, you will receive the principal amount plus the guaranteed interest earned.  CDIC (Canada Deposit Insurance Corporation) will guarantee eligible deposits up to a maximum of $100,000 (principal and interest combined) for financial institutions that are members of the CDIC.  At Matchett Financial Services, we only deal with GIC companies that are CDIC members.  We also track GIC rates for over 50 trust companies and banks every day covering the top rates in Canada.

A GIC is one of a variety of investment options.  By working with us, we can explore which type of investment product(s) might be right for you and can help you build a suitable financial plan.