The Upside: TFSAs & RRSPs: Making every dollar count for your future self!

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Subtitles are AI-Generated.

 

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Hello everyone and welcome to The Upside, I'm Kyle Cheropita.

 

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We're now firmly into 2026.

 

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That means the snow is falling, temperatures have plummeted across the country,

 

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and New Year resolutions may be fading.

 

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Spring isn't too far off though, but today we're talking about a different type

 

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of season, and that's RRSP season.

 

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The first 60 days of the year is your time to get contributions in to claim

 

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against your prior year's income.

 

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Let's zoom out for a moment. Exactly is an RRSP or Registered Retirement

 

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Savings Plan? How about a tax-free savings account?

 

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What are the basics of both and the benefits of using them?

 

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Today we're answering those questions and more with Michelle Munro, Fidelity's

 

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very own Director of Tax and Retirement Research.

 

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Michelle spends most of her time travelling the country, presenting to and

 

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talking with financial advisors and investors, so we're lucky to have her in

 

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our studio here today.

 

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Welcome, Michelle.

 

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Great to be here. Thanks for having me, Kyle.

 

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Thank you so much for being here with me today and talking all things RSPs and

 

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TFSAs. So let's start by defining the basics of

 

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both RSPs and TFSAs and really explaining the benefits of those programmes.

 

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Let's get into RSPs first.

 

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Okay. RRSPs, and we use so many acronyms in this industry.

 

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So registered retirement savings plan.

 

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Yes. As the name is branded, it's intended

 

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for retirement savings.

 

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So, okay, how does it work?

 

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We make a contribution to our RRSP.

 

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We get a tax deduction for that contribution, then inside the

 

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RRSP account... We can invest in mutual funds,

 

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stocks and bonds, ETFs, et cetera.

 

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The earnings from those investments is tax deferred

 

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until retirement.

 

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Typically when we make a withdrawal from our RSP and then it's taxable.

 

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Right, and what about, so there's this link between RSPCs and someone's

 

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taxes, what's this tax refund that I've heard about?

 

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A tax refund. What do you mean by that? Yeah, yeah.

 

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So we make a contribution to our RRSP, we get

 

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a deduction that reduces our taxable income, and often

 

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that means when we're filing our tax return, we get tax refund

 

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as well, which feels pretty good, awfully feels good in April.

 

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Very nice. Let's touch on contribution room.

 

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Is it correct to say that everybody's situation is unique in terms of their

 

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contribution room?

 

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Well, taxes, everything's unique. Right.

 

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Right, of course. Yeah.

 

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Okay, so contribution room, it's based on your earned income, and

 

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earned income is a tax term, which essentially means employment income.

 

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So it's 18% of your prior year's earned income

 

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up to a dollar maximum, which is $33,810

 

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for 2026.

 

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And if you've missed a year, for whatever reason, you can get caught up

 

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in a later year.

 

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Okay, so there is a ceiling, but it's quite generous.

 

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It is. And it's unique to the individual.

 

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And if you don't know how much your contribution room is, it will say on your

 

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notice of reassessment or of assessment when you file your tax return, as well

 

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as you can go on to what's called My Account, which is on CRA's website.

 

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Yes, that's right, I recall doing that in the past.

 

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Now let's pivot from RSPs to TFSAs.

 

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What are the basics of the tax-free savings account?

 

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Okay, tax-free savings account, there's a lot of similarities and there's some

 

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differences. It's a tax advantage account to save and invest.

 

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So when you make that contribution to your tax- free savings account TFSA,

 

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you don't get a deduction for that. There's no tax deduction for them.

 

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But you can invest in the similar investments, mutual funds, ETFs,

 

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stocks and bonds, what have you.

 

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The earnings on those investments inside the TFSA are

 

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tax- Free.

 

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Withdrawals from your TFSA are also tax free.

 

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In addition, TFSA is more flexible.

 

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So if you make a withdrawal, let's say in 2026, you can re-contribute

 

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that in a later year, 2027 or later.

 

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Okay, I did want to ask you a bit more about withdrawals, but first let's cover

 

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who tends to benefit from being involved in the TFSA programme.

 

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Anybody who has investable assets that they're

 

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looking to save and invest, a tax-free savings account is a

 

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great way to start because of its flexibility.

 

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Okay, and then contribution limits, are they the same?

 

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Oh, contribution limits. Great. Okay. So they're different than an RRSP.

 

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RSP is based on earned income.

 

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TFSA is based as long as you are 18 years of age or older,

 

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you start accumulating TFSA contribution room.

 

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So in 2026, that is $7,000.

 

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And there's no upper age limit either.

 

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So it continues on. If you've missed a year, again, you can catch

 

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up in a later year.

 

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Okay, so a lot of flexibility with the programme.

 

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And then I guess it would be safe to say then that somebody who's say in their

 

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late 20s, approaching 30, they've been working for a few years.

 

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If they haven't contributed to a TFSA in the past, they probably have a

 

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nice contribution room.

 

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They have a nice little nest egg there that they could be contributing,

 

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absolutely. Absolutely.

 

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Good programme to take advantage of.

 

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And again, we want to be looking on my account on CRA's website.

 

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Perfect. That's a good resource.

 

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It is. Excellent. Lots of good information there.

 

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Let's just double down on the withdrawal rules.

 

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So if you withdraw in one year, 2026 for example, you can

 

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then put that money back in in 2027.

 

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For a later year, so that there's more flexibility there and that

 

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withdrawal could be for anything.

 

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Let's say you're saving for a home.

 

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You could use that for the down payment of a home and then you could make a

 

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re-contribution in the later year.

 

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Okay, and speaking of homes, there are other programmes for that, but we should

 

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save that for another discussion.

 

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Okay, okay. Let's talk a bit about the deadlines.

 

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So I mentioned before, there obviously, there is this link between tax time and

 

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RRSP time. Right.

 

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What are the key deadlines that someone needs to keep in mind in the next few

 

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weeks or month from an RRSP perspective.

 

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Okay, from that RRSP perspective.

 

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Okay, so this is really one of the things I like about the RSP.

 

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You have 60 days after year-end, so a little bit of cushion room,

 

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to make that RRSP contribution and claim the deduction

 

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on the prior year.

 

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So 2025 tax year, we have until March 1st,

 

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60 days, after year end, 2026, to

 

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that RSP contribution.

 

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And then deduct it on your 2025 tax return.

 

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But, I looked at the calendar.

 

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March 1st is on a Saturday or Sunday.

 

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Yes. It's on a Sunday.

 

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So we get to March 2nd, the following Monday to

 

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make that RSP contribution.

 

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So everyone should be circling March 2nd on their calendar, or technically the

 

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week before.

 

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Why wait until the very last minute if you have time and you have the cash

 

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available And as well if you can get you that contribution

 

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in sooner It will start accruing that tax-deferred

 

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growth and earnings sooner

 

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Right, right. Okay, so February's crunch time.

 

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Right, February's Crunch Time. February's Crush Time, everybody.

 

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Get on those contributions.

 

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Let's go back to TFSAs then.

 

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Are the TFSA under the same deadlines?

 

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They don't have the same, because there's so much more flexible, it's just, if

 

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you get your contribution in on December 31st, then

 

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it's for December 31. But because you can contribute it later,

 

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there's not, we don't meet the same 60 days for the TFSA.

 

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And $7,000 for 2026.

 

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That's pretty good. It used to be like 5,000 or something like that, right?

 

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The TFSA started in 2009,

 

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so in 2026 at $7,000.

 

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When it started in 2009, it was $5,000, it's gone up, it

 

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actually went up to $10,000 one year, and then it

 

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went back down. Lots of things going on.

 

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But I should note for our audience though, that say they were 18 in

 

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2009 never made a contribution to their TFSA.

 

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They would have $109,000 of TFSA contribution

 

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room. Pretty significant.

 

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That is pretty significant, yeah. And certainly it's easier to do $7,000 or

 

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what have you each year as opposed to trying to come up with a six figure

 

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number.

 

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If my memory serves, 2009 was also the year that the Family Day holiday was

 

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launched. If it wasn't, it was around there, if it wasn't that year.

 

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So anyways, everybody enjoy your Family Day holiday coming up as well.

 

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So we established before the link between RRSP contribution time and taxes.

 

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So that will be in April, I believe, are the tax deadlines.

 

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Let's talk about those a bit more.

 

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Quick look, what are the tax deadlines coming up that people need to think

 

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about and any tips for tax preparedness?

 

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So we talked about the RSP deadline, March 1st,

 

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delayed to March 2nd.

 

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Tax returns for individuals are typically due on

 

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April 30th, as well as if you're self-employed or

 

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married to a self- employed individual, you have until June 15th.

 

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So thinking about that.

 

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For our viewers as well, what we might want to do is

 

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actually do an estimate of our taxes sooner rather than later.

 

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And Fidelity.ca does have a tax calculator that you can use this.

 

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The reason I'm saying we're doing this is so then you can assess, well, maybe I

 

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have a a tax balance owing.

 

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Well, at least I can start preparing for that sooner rather

 

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then later. Whereas maybe I'm getting a big refund

 

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or a refund.

 

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Let's get my tax return in a little bit sooner so I can get that tax refund

 

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a little sooner.

 

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Smart.

Smart, I feel like there's enough tax tips out there that you could probably

 

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come back and we could do a full show just on tax season.

 

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All right.

 

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Just get your receipts organised.

 

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Look at last year's return. What did you claim?

 

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Maybe you have child care expenses.

 

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Get those organised. Get your ducks in a row.

 

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Okay, okay. Anything specific for 2026 on tax brackets that

 

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you'd like to go into? Oh, tax brackets.

 

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Oh, tax brackets. Well, there's a nice little tax savings.

 

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The lowest tax bracket was reduced by 1%.

 

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What that means for a couple is about $750 over

 

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the entire year.

 

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But I'm a tax accountant, watch the pennies, let the dollars take care of

 

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themselves. I could spend that $750 there's many different ways.

 

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I'll enjoy it.

 

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Now, Michelle, back in December, you did a Reddit AMA with

 

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Fidelity Canada, very well received. A thank you to everyone in our community

 

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who contributed to that, asked a lot of great questions for Michelle.

 

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And I want to highlight a few of them today that were specific to TFSAs and

 

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RSPs. There were a lot interesting ones as well that you answered

 

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very well on interesting topics.

 

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I'm just going to refer to my notes here, something about crypto wallets in the

 

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CRA. There is one about cross-border money transfers, a few things on

 

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RIFs as well, and that's retirement income fund.

 

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For pensioners.

 

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Registration Retirement Income Fund, so that's when we mature our RSP and

 

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then it becomes a ref and we start to draw it down.

 

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Right, okay, maybe another topic that we could dive into more later, but just

 

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to get back on track, question here from that red AMA that I wanted to

 

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dive into with you. Somebody asked, after a big income boost, would it make

 

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sense to withdraw from a TFSA before December 31st of one year

 

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to sort of fill up their RSP contribution the following year?

 

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Okay, so first of all, we're gonna deconstruct the question.

 

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So somebody has something in their TFSA.

 

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They've got some investments in there.

 

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And their income is rising, okay.

 

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So now they're thinking, okay, well, I wanna take advantage of the RSP and

 

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get that tax deduction.

 

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So the strategy here is, okay well, I have my TFSA,

 

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I'm going to make a withdrawal from my TFSI, it's tax free.

 

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I can make that contribution to my registered retirement savings plan.

 

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Well, now I get that tax deduction, reducing my taxable

 

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income. And at the end of the day, I'm still getting that tax deferred

 

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growth of those investments.

 

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So that's a great strategy.

 

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Yeah, very good answer, so it's important to look at the big picture,

 

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obviously.

 

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Looking at the big picture, also thinking what is the individual's long-term

 

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goals, what are they planning? But a really common one is people are saving and

 

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investing for their futures, specifically retirement.

 

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Right. And probably safe to say at this time, it's always good for someone to

 

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talk to a professional so they can really dive into their own individual

 

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circumstances.

 

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But listen to an episode like this, really, if it gets you excited,

 

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you're really educating yourself.

 

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Great, one more I want to highlight from the AMA.

 

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Somebody asked, if your RRSP and TFSAs are maxed, what is the next

 

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best way to save and invest?

 

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Okay, well, for this individual, so they've maxed out their RSP,

 

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they've maximised their TFSA.

 

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What do they do now? Well, it depends again.

 

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So, are they eligible to invest in a first

 

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home savings account? They'd have to be a first-home buyer.

 

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First home buyer, yes.

 

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Maybe they have children and they wanna start saving for their registered

 

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education savings plan.

 

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Maybe they want to be looking at non-registered

 

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accounts. Maybe they wanna be paying off credit card debt or

 

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other debt. So thinking again, we wanna look at what is the

 

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big picture? What is that financial situation?

 

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What are their goals?

 

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And then how do we do that in a really tax-efficient way?

 

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Very good. So again, no universal answer.

 

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No one size fits all, very customised to the individual.

 

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Yeah. Great. One more from the AMA that I wanted to highlight to you.

 

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This one was interesting.

 

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Somebody talked about their income dropping and then what should they

 

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prioritise? So they asked, yeah, if someone's income has been dramatically

 

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reduced, perhaps from taking a break from their job, should they still max out

 

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their, and they referenced TFSAs and first home savings account contributions

 

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if possible each year.

 

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Okay.

 

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Thoughts on that?

 

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Again, and you know, sometimes you'll see this, I went through it when I had my

 

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children and I went on maternity leave and I saw a drop in my income.

 

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Other places, sometimes people just take a sabbatical from their jobs

 

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and they have a drop in their income and with these two situations I

 

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described, well, we know it's going to last a year or so.

 

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And so you're planning for that. And again, bringing it back to, and I kind of

 

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feel like I'm hounding this. But what are your goals?

 

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What are your plans? Where do you wanna stay on track to achieve those goals?

 

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And this question talked about, okay, well, it specifically

 

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talked about the tax-free savings account, first home savings account.

 

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I'm going to draw in the registered retirement savings plan, because their

 

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income has dropped, they probably have less to invest.

 

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The RRSP, because we would get that tax deduction, maybe we'll hold

 

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off on that. The TFSA has a little bit more flexibility.

 

15:00.599 --> 15:03.969

So we could make that, make a contribution there.

 

15:03.969 --> 15:07.339

We're not concerned about getting that tax deduction.

 

15:07.339 --> 15:10.509

The question went into the first home savings account.

 

15:10.509 --> 15:12.912

We'll spend a little bit of time here.

 

15:12.912 --> 15:15.414

First home savings accounts, it's relatively new.

 

15:15.414 --> 15:18.417

It was first introduced in 2023.

 

15:18.417 --> 15:21.887

What it is is you need to be a first home buyer.

 

15:24.156 --> 15:26.926

In most cases, that is exactly what it sounds like.

 

15:26.959 --> 15:28.627

Never bought a home before, your first time.

 

15:28.627 --> 15:32.798

Self-explanatory So you can save in a dedicated account,

 

15:32.798 --> 15:37.870

and again, we make that contribution to the First Home Savings account.

 

15:37.870 --> 15:41.607

When you open the account, you have $8,000 of contribution room.

 

15:41.607 --> 15:45.611

You get a deduction for that First Home Saved account

 

15:45.611 --> 15:46.412

contribution.

 

15:46.412 --> 15:46.912

Very good.

 

15:46.912 --> 15:51.116

Now we're going to invest in mutual funds, ETFs, stocks, bonds,

 

15:51.116 --> 15:54.753

what have you. That growth is tax free.

 

15:54.753 --> 15:58.590

Then we're gonna make a withdrawal some year down the road.

 

15:58.590 --> 16:02.628

That withdrawal for that first home is tax-free.

 

16:02.628 --> 16:07.066

So, it's combining the best of an RSP

 

16:07.099 --> 16:11.603

and the best of a TFSA.

 

16:11.603 --> 16:14.039

Really targeted for those first-time home buyers.

 

16:14.039 --> 16:16.075

We could do a whole other session on that.

 

16:16.075 --> 16:18.077

I think we've got a couple of shows lined up for the rest of the year.

 

16:19.511 --> 16:23.716

Now, what about for that individual, should they consider RSPs as

 

16:23.716 --> 16:24.316

well in there?

 

16:24.316 --> 16:28.120

Maybe consider RSPs. It depends how much they have to continue investing.

 

16:28.120 --> 16:28.687

Right, right, right.

 

16:28.687 --> 16:32.658

You do want to keep, where it's possible, stay on

 

16:32.658 --> 16:36.695

track, keep investing, even through the ups and downs, economic ups

 

16:36.729 --> 16:41.266

and down, because it might be a bit of a sacrifice today,

 

16:41.266 --> 16:44.737

but your future self will definitely benefit from that.

 

16:44.737 --> 16:47.806

Very smart. Now, we're getting close to the end of time today.

 

16:47.806 --> 16:50.909

Anything else that you wanted to add that maybe we didn't cover on the topics

 

16:50.909 --> 16:54.613

of RSPs, TFSAs, tax-related accounts to those?

 

16:54.613 --> 16:58.617

So often when I talk to individual investors, they feel

 

16:58.617 --> 16:59.218

a bit of- You're travelling-

 

16:59.218 --> 17:02.021

You're travelling a lot, as I mentioned in the intro across our great country.

 

17:02.021 --> 17:04.189

It's a bit of analysis paralysis.

 

17:04.189 --> 17:08.494

I want to do it perfectly and I just don't

 

17:08.494 --> 17:11.196

let that be just intentional planning.

 

17:11.196 --> 17:15.601

You want to have an idea of the big goal but just taking those

 

17:15.601 --> 17:19.605

first steps are so crucial and then you can

 

17:19.605 --> 17:21.407

build and tweak from there.

 

17:21.407 --> 17:25.477

And certainly attending a webinar or webcast

 

17:25.477 --> 17:29.448

like this today. If you're thinking, oh, that applies to me,

 

17:29.448 --> 17:34.219

well, I know Fidelity.ca has a plethora of information.

 

17:34.219 --> 17:36.488

Work with a financial advisor.

 

17:36.488 --> 17:39.558

Just continue that snowball effect.

 

17:39.558 --> 17:42.428

Very good, so just jump in and follow your goals.

 

17:42.428 --> 17:43.395

Absolutely.

 

17:43.429 --> 17:46.398

That's great, and Michelle, thank you so much for joining me here today.

 

17:46.398 --> 17:48.033

It's been a pleasure. Thanks for having me, Kyle.

 

17:48.033 --> 17:48.967

Alright, we'll have you back soon.

 

17:48.967 --> 17:49.902

I hope so.

 

17:49.902 --> 17:52.571

And thank you all for watching today as well.

 

17:52.571 --> 17:56.375

So at Fidelity Canada, we're releasing new content daily, so please look up the

 

17:56.375 --> 17:59.778

Upside or Fidelity Connects podcasts for more.

 

17:59.778 --> 18:03.715

With the Up side webcasts, you can learn to be a better investor and hear from

 

18:03.715 --> 18:06.985

some of Canada's best stock pickers and leading financial experts.

 

18:07.019 --> 18:10.989

To not miss a show, head to Fidelity.ca and sign up for the next webcast

 

18:10.989 --> 18:12.858

or the Up side newsletter.

 

18:12.858 --> 18:16.895

And if you want more clarification on how to approach the upcoming tax season,

 

18:16.929 --> 18:21.066

check out the article, Six Things to Prepare for Your 2025 Taxes on

 

18:21.066 --> 18:25.170

Fidelity.ca. Thanks for watching today, and I hope you'll join us again.

 

18:25.170 --> 18:26.438

I'm Kyle Cheropita.

 

18:43.222 --> 18:47.593

Thanks for listening to, or watching, Fidelity Canada's The Upside Podcast.

 

18:47.593 --> 18:51.597

Subscribe on your podcast platform of choice so you don't miss an episode.

 

18:51.597 --> 18:55.267

If you like what you're hearing please leave a review or a 5-star rating.

 

18:55.267 --> 18:58.537

Fidelity mutual funds and ETFs are available by working with a financial

 

18:58.537 --> 19:01.406

advisor or through an online brokerage account.

 

19:01.406 --> 19:05.010

Visit fidelity.ca/howtobuy for more information.

 

19:05.010 --> 19:08.480

While on fidelity.ca you can also find more information on future live

 

19:08.480 --> 19:12.417

webcasts. Don't forget to follow Fidelity Canada on LinkedIn, YouTube,

 

19:12.417 --> 19:14.186

Instagram or X.

 

19:14.186 --> 19:16.655

We'll wrap things up today with a quick disclaimer.

 

19:16.688 --> 19:20.425

The views and opinions expressed on this podcast are those of the participants

 

19:20.425 --> 19:24.496

and do not necessarily reflect those of Fidelity Investments Canada ULC or its

 

19:24.496 --> 19:28.500

affiliates. This podcast is for informational purposes only and should not

 

19:28.500 --> 19:31.403

be construed as investment, tax, or legal advice.

 

19:31.403 --> 19:34.907

It is not an offer to sell or buy or an endorsement, recommendation or

 

19:34.907 --> 19:37.876

sponsorship of any entity or security cited.

 

19:37.876 --> 19:41.446

Read a fund's prospectus before investing. Funds are not guaranteed.

 

19:41.446 --> 19:45.083

Their values change frequently and past performance may not be repeated.

 

19:45.083 --> 19:49.221

Fees, expenses and commissions are all associated with fund investments.

 

19:49.221 --> 19:51.623

Thanks for tuning in. We'll see you next time.