Here are six ways to shelter your savings from tax :
1. A Registered Retirement Savings Plan ( RRSP )If you are earning $40,000 or more, you will lower your taxes by $300 to $400 for each $1,000 you put into an RRSP. There's no tax on what you make investing until you take the money out. When you retire and start spending your RRSP savings, you'll pay income tax on the money you take out each year. Since your income tax bracket will likely be lower than it was during your peak earning years, you'll pay less tax on your investment.
2. A Registered Education Savings Plan ( RESP )An RESP account gives you a tax break while you save money for your children's education. Unlike with an RRSP, you can't deduct RESP contributions from your income for tax purposes. But the money you make investing is tax-free as long as it stays in the account.
To help you save, the government gives matching grants, based on your family income. Later, when the child takes payments from the plan to help with education costs, he or she pays tax only on the money you made investing, not on the money you put into the account.
3. A Registered Retirement Income Fund ( RRIF )
If you have an RRSP, you have to close the account by the end of the year you turn 71. If you just withdraw all the funds as cash, though, you'll pay a huge tax bill. What can you do?
You can transfer your RRSP savings into a RRIF. You pay tax only on the money you take out. You must withdraw a minimum amount of cash every year. The money you make investing inside the RRIF continues to grow tax-free.
Six ways to shelter your savings from tax
