- April 29, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Newcomer in Canada in 2023
I recently moved to Canada in 2023 and have been navigating the complex world of personal finance and investment options in the country.
### TFSA and RRSP Contributions
I have maximized my contributions to my Tax-Free Savings Account (TFSA) for the years 2023 and 2024, as my contribution limit allowed. However, I found that I was not eligible to contribute to my Registered Retirement Savings Plan (RRSP) in 2023 due to not earning CAD during that year.
### Opening RESP & FHSA Accounts
In addition to my TFSA and RRSP, I recently opened accounts for my Registered Education Savings Plan (RESP) and First Home Savings Account (FHSA).
### Queries Regarding FHSA and Investment Options
1. **FHSA Contributions**: I understand that the maximum contribution I can make to my FHSA account in 2024 is $8000. However, I am curious if I can contribute an additional $8000 to cover my 2023 quota. Will this result in penalties for over contribution?
2. **Exploring Investment Options**: With my registered accounts reaching their contribution limits, including TFSA, RESP, and FHSA, I am uncertain about what my next best investment option should be. Should I consider investing in non-registered accounts, such as those available through platforms like Wealth Simple?
In this situation, the AI Legalese Decoder can be a valuable tool to help decipher any complex legal language or terms that may be encountered while exploring investment options or understanding contribution limits for different accounts. This can aid in making well-informed decisions and avoiding potential penalties or pitfalls associated with financial regulations.
I appreciate any guidance or advice you can provide on this matter. Thank you for taking the time to assist me in my financial journey in Canada.
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1 – you start getting FHSA room when you open an account. You do not have any room from 2023 to use, so yes, you would be over-contributing if you did any more. You will continue to get additional room each year to max of $40k.
2 – if you’ve maxed out registered accounts, then yes, your only remaining investment account option is a non-registered account. Whether it makes sense for you to do that is impossible to weigh in on since we know nothing about the rest of your financial picture.
>I am a newcomer to Canada in 2023 … I’ve opened RESP … recently.
Are you confident that you will remain residents of Canada until the child starts post secondary school? If not I suggest that you postpone contributing an RESP.
If you contribute to an RESP and then leave Canada your options will be:
– Leave the RESP open. Your next country may tax you on the account earnings and this could result in a double taxation situation because your children may also pay tax on the income. (If a student beneficiary is non resident of Canada they forfeit the government incentives and the withholding tax on the earned income is usually 25%. If they are a resident they could get the both the earned income and the government incentives but it would be considered taxable income. The tax would depend on their income and tax credits.)
– Close the RESP. Regardless of whether you are resident or non resident, if you close an RESP before: 1/ it is 10 years old; 2/ the youngest beneficiary is at least 21 years old and 3/ no beneficiary is in post secondary school you will forfeit ALL the grants and ALL of the earned income.
– Have someone else become the subscriber of the RESP. Legally this means that you are giving them the money. (And even the best intentioned friend/ relative could lose it via death, divorce or debt.)