• About
  • Start Here
  • Categories
    • Money
      • For Beginners
      • Women
      • Budget Roundups
      • Discussions
      • Budgeting
      • Debt
      • Investing
      • Net Worth Calculations
      • Wealth
      • Retirement
      • Taxes
      • Canada
      • USA
      • Foreign
    • Minimalism
      • Discussions
      • Lifestyle
      • Nomadism
      • Style
      • Capsule Wardrobe
    • Career
      • Success story
      • Discussions
      • Salary
      • Entrepreneurs
      • Education
    • Style
      • #OOTD Daily Style
      • Month of Style
      • Capsule Wardrobe
      • Discussions
      • What I bought
      • What I sold
      • Organization
      • At Work
      • In my closet
      • Wardrobe Help
      • Women
      • Men
      • Shopping
      • Shop Quality Series
      • Sunday Shopping
      • Style Bloggers <3 Budgeting Series
      • Shopaholic Series
    • Travel
      • Discussions
      • Budgeting
      • Packing
      • Stories
      • Travel Series
    • Life
      • Discussions
      • Parenting
      • Bonus Stuffie Adventures
      • Recipes
      • Reviews
      • What I read
      • Technology
      • Week of Money Diary
      • Ask Sherry
  • Products
    • The Budgeting Tool
    • Like A Boss Series by Sherry
    • The Investing Tool
  • Help
  • Forums
  • Contact

Save. Spend. Splurge.

  • About
  • Start Here
  • Categories
    • Money
      • For Beginners
      • Women
      • Budget Roundups
      • Discussions
      • Budgeting
      • Debt
      • Investing
      • Net Worth Calculations
      • Wealth
      • Retirement
      • Taxes
      • Canada
      • USA
      • Foreign
    • Minimalism
      • Discussions
      • Lifestyle
      • Nomadism
      • Style
      • Capsule Wardrobe
    • Career
      • Success story
      • Discussions
      • Salary
      • Entrepreneurs
      • Education
    • Style
      • #OOTD Daily Style
      • Month of Style
      • Capsule Wardrobe
      • Discussions
      • What I bought
      • What I sold
      • Organization
      • At Work
      • In my closet
      • Wardrobe Help
      • Women
      • Men
      • Shopping
      • Shop Quality Series
      • Sunday Shopping
      • Style Bloggers <3 Budgeting Series
      • Shopaholic Series
    • Travel
      • Discussions
      • Budgeting
      • Packing
      • Stories
      • Travel Series
    • Life
      • Discussions
      • Parenting
      • Bonus Stuffie Adventures
      • Recipes
      • Reviews
      • What I read
      • Technology
      • Week of Money Diary
      • Ask Sherry
  • Products
    • The Budgeting Tool
    • Like A Boss Series by Sherry
    • The Investing Tool
  • Help
  • Forums
  • Contact

Save. Spend. Splurge.

  • About
  • Start Here
  • Categories
    • Money
      • For Beginners
      • Women
      • Budget Roundups
      • Discussions
      • Budgeting
      • Debt
      • Investing
      • Net Worth Calculations
      • Wealth
      • Retirement
      • Taxes
      • Canada
      • USA
      • Foreign
    • Minimalism
      • Discussions
      • Lifestyle
      • Nomadism
      • Style
      • Capsule Wardrobe
    • Career
      • Success story
      • Discussions
      • Salary
      • Entrepreneurs
      • Education
    • Style
      • #OOTD Daily Style
      • Month of Style
      • Capsule Wardrobe
      • Discussions
      • What I bought
      • What I sold
      • Organization
      • At Work
      • In my closet
      • Wardrobe Help
      • Women
      • Men
      • Shopping
      • Shop Quality Series
      • Sunday Shopping
      • Style Bloggers <3 Budgeting Series
      • Shopaholic Series
    • Travel
      • Discussions
      • Budgeting
      • Packing
      • Stories
      • Travel Series
    • Life
      • Discussions
      • Parenting
      • Bonus Stuffie Adventures
      • Recipes
      • Reviews
      • What I read
      • Technology
      • Week of Money Diary
      • Ask Sherry
  • Products
    • The Budgeting Tool
    • Like A Boss Series by Sherry
    • The Investing Tool
  • Help
  • Forums
  • Contact

In Canada, Money, Retirement, Taxes

2020 Canadian RRSP, TFSA and RESP limits (Canada)

Posted on December 31, 2019

Registered Retirement Savings Plan (RRSP)

Tax-sheltered meaning you get a tax credit when you contribute towards it (lowers your taxable income) BUT you pay taxes when you withdraw the money at the time of retirement

  • 18% of your income
  • Maximum of $27,230 for 2020 or an income of $151,277.78
  • Maximum of $27,830 for 2021 or an income of $154,611.11
  • You can withdraw the money before retirement but you’ll pay full income taxes on it and a 10% penalty.

This means if you make $60K a year and you take out $10K from your RRSP, you’ll pay taxes on $70K of income PLUS a tax withdrawal on the $10K, or an extra $1K in taxes which can be applied to your taxes for that year.

The government basically holds back the taxes on the withdrawn RRSP amount, and you can report that income on your income taxes as “prepaid”

Tax rates on withdrawals

When you withdraw funds from an RRSP, your financial institution withholds the tax. The rates depend on your residency and the amount you withdraw. For residents of Canada, the rates are:

  • 10% (5% in Quebec) on amounts up to $5,000
  • 20% (10% in Quebec) on amounts over $5,000 up to including $15,000
  • 30% (15% in Quebec) on amounts over $15,000

Not a great emergency fund, consider this money locked in.

Can be dipped into to use for buying a home for the first time up to $25K to be borrowed and paid back over 10 years on a fixed schedule, OR used for education.

RRSP Strategy

Mine is maxed.

I have no RRSP room as a freelancer because I take dividends and not a salary (you need a T4 earned income to gain RRSP room), but I compensate by contributing hard to my TFSA.

I put my U.S. holdings in here because I don’t pay that extra 30% withholding U.S. tax if I do due to the Canada/U.S. tax treaty, and I leave it for the long term in index funds.

Tax-free Savings Account (TFSA)

Tax-deferred meaning you don’t get a tax credit when you contribute to it BUT you won’t pay taxes when you take the money.

You can take the money any time you want with zero penalty.

Maximum for 2020 is $6000

Between the RRSP and TFSA, this one is best used as an emergency fund or fallback Plan C if you’re in need of money.

Everything grows in there – capital gains, dividends, with NO taxation aside from the year you contributed.

TFSA Strategy

I max it yearly.

I have some money in my unregistered accounts, so I always transfer high-performing investments over to my TFSA rather than putting in amount from my savings account each year.

I put dividends and capital gain stocks in here.

Registered Education Savings Plan (RESP)

  • Not tax-sheltered or tax-deferred.
  • Unlimited contributions (no cap)
  • You can put all $50K in there the day they’re born but I’d advise against that.
  • Lifetime RESP contribution limit of $50,000

If you start the year they’re born, that means it is an $2777 annual contribution a year until the age of 18 to reach the $50,000 cap

20% Lifetime Canadian Education Savings Grant (CESG) Bonus

Contribute a max of $2500 a year to get the government 20% match ($500 in free money) from the

If your family income is lower you can get up to a 40% match:

  • $200 extra if your net family income is $40,970 or less;
  • $150 extra if your net family income is between $40,970 and $81,941.

CESG government matching lifetime limit of $7200

$7200 lifetime limit on a CESG match which means if you’ve contributed $36,000 to the plan, you’d have maxed out the government contributions and will receive no more extra bonus money.

If you start the year they’re born, that means it is a $2000 annual contribution a year until the age of 18 to reach $36,000.

Little Bun RESP strategy

I’m contributing $2500 a year to obtain the 20% match until our lifetime $7200 contribution is fully maxed out which will be around the time he is 15, and hopefully he will have taken over those accounts, to manage his own investments.

The extra money he will have, will be saved aside in an unregistered account, as a mix of cash in a high interest savings account and investments in index funds and large cap stocks.

That money will be used towards private secondary schooling, estimated at $5000 a year from age 12 to 17, or 5 years, so we will need $25K or more due to inflation.

Any extra money leftover will be given to him to manage on his own when he starts school for whatever he thinks is prudent, with some very strong, sage advice from his parents of course. I’d definitely encourage him to invest that money instead and will be showing him (fun but compelling) compounding interest graphs.

Do not be fooled by the word SAVINGS

You should always invest all of this money in any of these accounts into the stock market.

Putting it into a high-interest savings account is a real waste of these accounts. It makes me sad (truly) when people put cash in these accounts and think things will be fine.

You will not become rich just by saving alone. You need to invest that money and take advantage of compounding interest in the stock markets to grow your cash.

If I had invested my $14K from my old RRSP into a savings account, you know what I’d have today?

$16,800.

Instead, I invested it, let it grow and it is now worth $33,000.

That’s a difference of $16,200!!

That’s almost DOUBLE the hypothetical savings balance had I not put it into an index fund and left it.

Imagine that money now in 30 years when I’m going to take it to retire. I’d have at least $100K in there, but if I left it in savings, I’d have $25K instead or a quarter of its potential.

Would you rather have $25K or $100K?

Scale back as you get closer to when you need the funds

For the RESP, as they near the age 10, I’d scale back on stocks, and move it into more stable investments like cash or bonds because you want that money there and ready for when they’re 18 and about to start school.

You don’t want the volatility of a moving stock market and then hit a recession just as they start school.

Same with the RRSP as you move towards retirement, shift it to more stable sources.

I plan on having about 50/50 in stocks versus bonds/cash by the time I retire because I still want my retirement nest egg to grow but I don’t want any surprises.

I haven’t fully worked out my strategy for my retirement yet, but I suspect I’ll be able to not touch any capital and just live off my side income, adjusting my lifestyle as I see fit.

Related

Share Tweet Pin It +1

Sherry of Save. Spend. Splurge.

Am my own Sugar Daddy. Am a millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I have 11 side incomes that are on track in 2020 to make me $50K - $75K. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

You may also like

Are you really as rich as you think you are?

Posted on May 28, 2014

Ask Sherry: Breaking down my Comfortable Budget & Saving for Kids College

Posted on May 15, 2020

A man is not a plan. Anything can happen.

Posted on March 4, 2020

Previous PostShop Quality Series: My $11,000 Outfit Breakdown
Next PostShop Quality Series: How to trick yourself into shopping less - Effective, real-life, tried and true ways from a former shopaholic

2 Comments

  1. Nicole

    Thanks for all the info! I’ve just been reading about foreign withholding tax on Canadian-held US ETFs. As I understand it so far… the taxes apply to the yield only so it could be worth paying it vs having to convert CAD to USD to get the US-held funds. Do you have experience with buying US currency/funds through a brokerage and is it worth it for you? Any further reading you can recommend on the subject? Thanks again!

    Reply
    1. Sherry of Save. Spend. Splurge.

      It is only to the yield yes, and “worth it” but for me it eats into profits so I am hesitant, to be honest.

      What you need to do is convert CAD to USD (and pay a forex fee) within your discount brokerage/account (I use Questrade – referral code [ o0soehds ].

      After you convert CAD to USD, then you just buy what you want in USD. You have two currency balances inside an account and can see combined balances or JUST CAD or JUST USD.

      If you want to buy US stocks there is no other way around it. For me, it has seemed to have been worth it but with the exchange rate at 1.30, PLUS a Forex fee, PLUS the 30% withholding… it seems like a lot of hassle when you can just buy Canadian stocks or ETFS.

      Reply

Leave a Reply Cancel Reply

Never miss a post!

In a nutshell…

Save. Spend. Splurge.
[ wealth. style. minimalism. ]

——

MOST DEBT: cleared $60K in 18 months

MONEY: Hit $1M personal net worth At 36

NEW GOAL: $1M in invested assets

FAVOURITE DAY: payday

HATES: being late & lazy people

SOCIAL: Instagram @saverspender

DRINKS: homemade matcha lattes

SLEEPS: on a 100% cotton U.S.-made futon

WRITES: Books (also available on Amazon).

BEAUTY: swears by Paula’s Choice

——

…but you can read more about me , browse my index of posts, or get in touch with me, talk to me directly on Instagram, and of course, ask me anything here.

$35 The Wealth Building Tool

Like a Boss Library (Sherry’s Books)

Referral Codes

Free Money Surveys
[ Use this link ]



Webhosting
[ saverspender ]



Shopping Cashback
[ Use this link ]



Clothing Resale


[ SHERRYISH ]



Private Lending
[ 7b03f0 ]



No-Fee Banking
[ 32726976S1 ]



Discount Brokerage
[ o0soehds ]



Social media scheduler
[ saverspender ]



Blog Ad Network
[ Use this link ]



Disclosure

Save. Spend. Splurge. uses affiliate links from Shopstyle, and Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com or ShopStyle. In addition to these, any referrals on the page will result in revenue if used such as BlueHost.

In English: If you click on a link, I could get a small commission, typically a few cents. And if you use a referral code, I could get anywhere from $10 – $70 for it. Thank you for your kind support!

Also, I am not a professional investment advisor or money manager by any means.

I am just a woman who loves money, talking about money, and making money.

All opinions expressed on this blog are personal and for entertainment value. Take them with a grain of salt and always consult a professional when in doubt.

I find a great place where can save a lot from online shopping
Save. Spend. Splurge.

© Save. Spend. Splurge. 2019. All Rights Reserved.

Back To Top