Canadian and American investment accounts differ in several ways, yet are similar in others. The traditional American IRA, known as a Roth IRA is like the Canadian TFSA (Tax-Free Savings Account). Recall that an IRA is an Individual Retirement Account, and it has been in operation for 20 years. The concept behind a Roth IRA is simple: all money that is invested in the retirement account is taxed initially, but when it is withdrawn it is tax-free. There are significant similarities between the traditional Roth IRA and the TFSA in Canada. They were both designed with the intent to be able to contribute post-tax funds and allow for tax-free growth. For Canadians, the withdrawal regulations with the TFSA are much easier.

In Canada, the TFSA (Tax-Free Savings Account) is similar in many respects to the Roth IRA in the following ways:

  • Annual contribution limits of $5,000 for the Tax-Free Savings Account and $5,000 for the Roth IRA
  • All monetary contributions are considered after-tax investments, although there are retirement savings credits available with the Roth IRA
  • Roth IRA and TFSA earnings are not taxable
  • A wide range of financial instruments can be purchased with the TFSA and the Roth IRA including exchange traded funds, stocks and mutual funds
  • These investment options are relatively new, and the TFSA was launched in 2009

Despite their similarities, there are many differences between the mechanics of TFSAs and IRAs. In Canada, any withdrawals that are made from a Tax-Free Savings Account have zero tax levied on them. With a Roth IRA, the account holder must be at least 59.5 years of age to qualify for the non-taxable withdrawals. Additionally, the Roth IRA account must be at least 5 years old. Another significant difference between the Roth IRA and TFSA accounts is found in the contribution limits. With the TFSA accounts, there are no restrictions on contributions based on income. With Roth IRA accounts, there are income limitations. It is possible to accumulate Tax-Free Savings Account contributions, but not with Roth IRA accounts.

How does the RRSP compare to the TFSA?

In theory at least, both these investment options – the TFSA and RRSP are ideal savings options for Canadians. The Registered Retirement Savings Plan (RRSP) differs markedly from the TFSA, and it’s worthwhile understanding how these differences can impact your ability to save, and your retirement funds availability. These accounts both offer tax advantages for the investor, and they are designed to facilitate easier retirement planning. By providing a tax shelter for investments, these Canadian retirement plans make it easier to generate substantial income growth in a tax-free investment option. The benefit of investing with the RRSP is that you get tax deferments when your income is taxed at a high rate, and you can withdraw it when your tax bracket decreases to a lower rate.

It encompasses all pre-taxed income and it is possible to borrow from you RRSP via lifelong learning plans or homebuyers’ plans. In 2016 the maximum contribution to the RRSP was 18% of gross income (C$25,370). A wide range of financial instruments can be held in an RRSP account, including stocks, bonds, mutual funds and GICs. Since it’s a tax deferral plan, tax payments will have to be made when you withdraw your money. This means that the tax rate will be much lower because your earning potential will be minimal at retirement.

Pick an Option: Either is Much Better than No Investment Option

The TFSA is relatively new, and it allows for tax-free withdrawals at any time. There are strict rules with regards to how withdrawals can be made with the TFSA, including the rule that your contribution room will be limited to the next calendar year. For example, if you withdraw $3000 in one year, you will have $5000 + $3000 available for the next calendar year. All payments into a TFSA are considered after-tax income and the maximum contribution per annum is $5500 for anyone 18+ (with revisions towards $10,000).

As at 2016, the contribution increased to $46,500 for new accounts. It also serves as a useful account for long-term investments in equities. Various different financial instruments can be held in TFSAs including bonds, mutual funds, GICs. Regardless of which Canadian retirement plan you pick, there are inherent benefits in both. Both the RRSP and the TFSA are useful financial instruments to make retirement planning a little less stressful.

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Are you getting tired of the same old vacations?  Vacation time is often limited and you no doubt want to use it wisely. If you return to the same beach year after year and are enjoying your time there – good for you! If you’re ready to ramp up your vacation experience, try these recommendations from the travel experts.

The first step is to determine your travel dates and set your budget. One great option to consider is combining a beach trip with a trip to an urban area. Atlantic City fits this bill. With easy access from the New York metro area, Philadelphia metro area and Washington DC, Atlantic City and the neighboring beaches are a premier attraction on the East Coast. Experience the glamorous cabaret shows, performances by famous artists and world-renown cuisine in the many casinos that line the boardwalk. Take advantage of the awesome deals offered by Groupon coupons and consider booking a room at the Ballys Atlantic City Resort & Casino. Beyond great restaurants and shows, Atlantic City boasts the second largest casino operation in the country.

Atlantic City, and the beach towns of Margate, Ventnor and Longport are located on the island of Absecon. If you’re a surfer, you’ll love the wave action in Margate. The town has designated a portion of the beach exclusively to surfers. How fun is that?  Margate and Long Port both boast a vast array of restaurants from casual to formal.  Nestled between the Lakes Bay and the Atlantic Ocean, these beach towns have stunning marshes and wildlife. From paddle boarding, to fishing to fishing, there are activities for every member of the family. For long days on the beach, Long Port has roaming ice cream vendors that manage to appear at just the right time. There’s nothing better than savoring an ice cream sandwich on the beach!

Take the time to leisurely explore these beach towns during the day and ramp up the action at night with visits to Atlantic City. Have a grand time ramping up your vacation experience. You’ll be sure to return next year!

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