Unlock the Power of Digital Signature Legitimateness for Investment Contract in Canada

How to eSign a document: digital signature legitimateness for Investment Contract in Canada

you've heard us talk about taxed advantaged investment accounts before like tax-free or tax deferred accounts now these are typically the investment accounts that you'll hear about because they give you tax benefits and why not take advantage of that and save some money on taxes these taxed Advantage accounts like the tfsa and RSP in Canada or the Roth IRA and 401K in the United States were created by the government to encourage people to invest and give you that little incentive or perk let's use a tax-free account as a quick example here for both the tfsa and Roth IRA you can contribute money into the investment account by Investments within that account and then let them grow for a number of years then in the future when you sell your Investments and take money out of the account to use you don't have to pay any taxes on the income that you're getting from yourself now because that's a great perk and again think of all the taxes you pay on your monthly income right now not having to pay any taxes let you keep a lot more of that money but because of that there's a limit to how much you can invest in this account in 2024 those contribution limits are $7,000 for the tfsa and $7,000 for the Roth IRA if you're under 50 years old if you're over 50 it's actually $8,000 now on top of those contribution limits or cap on how much money you can invest within the account there's also rules about how long you have to keep your money invested for and what reasons you're allowed to withdraw the money for for example with a retirement account like the American 401K you have to keep your money invested until a specific age if you end up withdrawing your money earlier than that you of course have to pay taxes on that money but you'll also have to pay penalty fees another example would be the Canadian RSP now in this case there's actually a program where you can actually withdraw money from this account to buy your first home but if you don't repay the funds back into your account within 15 years you again have to pay a penalty fee so let's say that you max out your limits for the tax advantage investment accounts or you know that you're going to have to withdraw money in the shorter term and you don't want to pay fees how do you keep investing there's an answer to that question and it's that there's other types of investment accounts that you can use too they're called non-registered investment accounts or taxable investment accounts taxable investment accounts are investment accounts with no specific benefits or perks and in return you have less rules and more flexibility you can invest an unlimited amount of money you can withdraw your money at any time and for any reason and you won't have to pay any penalties or fees associated with that on the other hand you do have to pay taxes on the income earned from your Investments like Steph touched on before tax advantaged accounts typically give one or both of the following tax benefits taxfree meaning you can take your money out including the money that grew on top of your contributions hopefully without having to pay any taxes on this income tax deferred meaning that you'll eventually pay taxes on the money that you withdraw from your account but in the year that you contribute that money to that account you can actually deduct that amount from your taxable income meaning you pay less taxes now and they're deferred until the future with a taxable account you do pay taxes on the money that you take out of the account at any point and you don't reduce your taxable income by putting money into the account but again you also have the flexibility to take out as much money as you want you can contribute as much money as you want and you can have multiple different taxable accounts without having to keep track of a combined limit the other thing to keep in mind here is that registered accounts are literally registered with the government whereas non-registered accounts aren't it's just like you're checking in savings accounts those aren't registered so a taxable account is just like those accounts whereas a tax advantaged account is registered so that the government can make sure that you're sticking to the rules and following the limitations the government will also update you on what your contribution room is and whether you've gone over okay let's talk a little bit more about the taxes you'll have to pay with the taxable account at a high level when you sell an investment within a taxable account for a profit meaning that you invested in something it grew and you made money then you sold that investment in a officially made money that's called a capital gain capital gains are taxed differently depending on where you live in Canada 50% of any capital gains are taxable so let's say that you sold an investment for $50 you'd have to add $25 or 50% of that to your taxable income for the year and the US they split capital gains into shortterm which is under 365 days and longterm which is over 365 days now I'm not going to go into the exact rates right now but know that there's a difference depending on how long you hold on to the investment and that the long-term capital gains rate rate is lower also keep in mind that there's other ways to be taxed too so the first way is like I just said when you sell a stock ETF or other investment and make a profit or when you receive an interest payment from a taxable Bond or other investment and the last way is when you receive a dividend which is when a stock or fund pays you out a specific amount of money every month quarter or year those three things are all you making a profit and receiving money from your Investments so with the taxable account all three ways of you making money are going to be taxed now you pay these taxes at tax time when you file for the past year so let's say that you sold a stock made a profit in 2023 you would pay the taxes on that sale the next year when you actually go to file your taxes same thing with interest payments and also with dividend payments okay so now I want to go over how you can actually go about opening up a taxable account and if it makes sense for you Steph's going to cover when that is right after this step number one is choosing a platform to open your account so this could be a bank or other financial institution a brokerage or an online platform the biggest thing to look out for here are fees account minimums and other specific rules that the provider has sometimes there's fees just to have an account and for every investment you make but there are low or no fee platforms out there that can save you thousands of dollars over time Steph uses well simple trade and there aren't any fees associated with that platform on top of that even though taxable accounts themselves don't have limits the platform May Implement balance minimums so what that means is that for example they might say that you have to invest $1,000 or more in order to use their taxable investment account watch out for that step number two is actually opening up an account with the platform typically you should be able to do this yourself online and depending on how userfriendly the platform is it should be pretty quick and easy step number three is to fund the new account with money this means that you deposit money into your taxable investment account that you'll then use to buy Investments with you should be able to transfer money from your checking or savings account into your investment account once again hopefully you chose a platform that won't charge you for this step number four is to choose your investment option and start buying Investments we personally are pro passive Investments across any type of investment account so funds that track the market Market but we'll link a video up top that explains that a little bit more and that's it after those steps you'd have your investment account open and your investment started keep in mind that the process is pretty similar for opening up a tax advantaged account as well with a few slight differences depending on the account for our personal investment strategy we plan on maxing out all of our taxed Advantage accounts before moving on to taxable investment accounts based on our timing and financial goals now we both started with our tfsas or taxfree accounts because our primary goal is investing for retirement and we're also hopefully not in our highest income earning Years yet to explain that a bit your RSP is most useful in the years that you're making the most money because contributing to it brings down your taxable income for that year when you're making more money you're also paying more taxes so if you're able to bring down your taxable income in those years that you're making the most money that's how you can benefit from this account the most so with all of that being said we want to max out all of our years of tfsa contribution room first and then move on from there now I'm actually personally at the point where my tfsa is maxed out so the next thing I'm going to be doing is opening up the Canadian fhsa or first Home Savings Account Now I can contribute $8,000 to that this year before that's maxed out and then I'll likely be opening up an RSP after that Dennis is also going to be following the same path but he's still working on maxing out his tfsa first now there is an argument to make that maybe it makes more sense to start using a taxable investment account before putting money into my RSP if I think there's a chance I'll be earning more money per year in the future so that's one use case for maybe using a taxable account first as of right now my plan is to use all of the tax advantage investment accounts and then when I'm not allowed to contribute to them within a calendar year anymore because they're all maxed out then I'll start using a taxable investment account which is the second use case for taxable accounts and I think it's most likely the most applicable to the majority of people watching this again if you're in Canada for example you can invest all of your prior years tfsa contribution room and if that's maxed out you can invest another $7,000 this year after that you can invest up to 18% of your past Year's income into your RSP so for example if you made $50,000 last year your limit would be $13,500 $ after that if you're a first-time home buyer you can invest up to $88,000 into your fhsa for this year and that's not even to mention the other registered accounts like our esps and R dsps if they're relevant to you that means that you'd have to invest in this example let's say you had a $75,000 Pere salary your tfsa is maxed up up until this point and you haven't bought your first home yet $28,500 in a year before it would make sense for you to open up a taxable account if me going through that example didn't make it clear you're likely already making and investing a very high amount of money before it makes for you to open up and start using a taxable account which means that it won't for the vast majority of the population if you have any other questions about investing with a non-registered or taxable account make sure you guys let us know down in the comment box below and if you want to learn more about you know the other Canadian tax advantaged accounts at the tfsa RSP RP or rdsp make sure you check out this playlist next and we'll see you guys next week with another video you already know