- Taxable Savings
- This is an ordinary, taxable, savings account. There are no restrictions for deposits or withdrawals, but all earnings and capital gains are taxable. In addition, there is no tax deduction to any deposits to an ordinary taxable account.
- Tax Free Savings Account (TFSA)
- This is a flexible savings account that allows Canadians 18 and older to save for any purpose and withdrawals are tax free. The contribution limit for 2021 is $6,000, not including any catchup contributions for previous withdrawals or years where you didn't contribute the maximum. In recognition of the fact that people are likely to have multiple savings objectives at various stages of their lives - e.g. vacation, wedding, car, home or cottage - the full amount of withdrawals may be re-contributed to a TFSA starting the following year, to ensure that there is no loss in a person's total savings. For complete details of how a TFSA works please visit https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account.html.
- Starting balance
- Any existing balance for the accounts.
- New contributions
- Your periodic contribution. All contributions are assumed to happen at the beginning of the period.
- Contribution frequency
- The frequency of your contributions. The options are weekly, every other week, twice monthly, monthly, quarterly, semi-annually or Annually. All contributions are assumed to be made at the beginning of the period.
- Years to contribute
- Number of years you plan on making contributions.
- Annual rate of return
- This is the annual rate of return you expect from your investments. The actual rate of return is largely dependent on the type of investments you select. For example, the total return including dividends of the S&P/TSX Composite Index for the 10 year period from December 31, 2011 through December 31, 2021 was 8.9% (source spindices.com). Savings accounts at a bank or credit union may pay as little as 2% or less. It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment.
- Income tax rate
- Your marginal income tax rate. This is used to estimate the amount of tax you will pay on your RRSP and taxable account options.
- Compensate for tax-deduction
- If you check this box the calculator will assume contributions to the RRSP investment are tax-deductible when they are made. The calculator will then increase the contribution amount for the RRSP investment by the amount required to make the net contribution equal to the investments that have contributions made on an after-tax basis.
