Interview with Angela Iermieri, Financial Planner, Desjardins Wealth Management
Q – Ethiquette
As a financial planner, to whom do you recommend a tax-free savings account (TFSA)?
A – Angela Iermieri
The choice of investment vehicle should be a function of the investors’ objectives. The types of people who could benefit from a TFSA include:
- People who want to save for a medium or longer-term project
The TFSA is more than a simple savings account. It’s a tool that is advantageous for people who wish to put money aside for a project that they want to realise in 3 to 5 years. It’s flexibility allows revenu to be withdrawn without being taxed, which effectively becomes a net suplus to be put towards the project.
- People who have maximized their RRSP
The TFSA is attractive to people who have already contributed the maximum allowable amount to their RRSP, and still have money to put aside. The TFSA is a great option as it is an investment vehicle that allows for people in this situation to invest without being taxed.
- Retired people
People who are retired have probably been the most thrilled with the arrival of the TFSA. While they no longer have the right to contribute to a RRSP, retirees who still wish to invest find the TFSA just the thing for them. In addition, income earned from the TFSA is not added to their retirement income for purposes of federal pension benefits calculations. The beauty of this is that a pensioners’ government benefits are thereby not reduced by this income. This applies to both the Guaranteed Income Supplement for lower income pensioners and the Old Age Security pension for those with higher income.
- Young people and people with modest incomes
I often come across young people, at the beginning of their carreer, who are keen to contribute to their RRSP. Of course, it’s advantageous to begin contributing early – we can’t say it enough -, but for an 18 year old (the required age to open your own TFSA) in his or her first job, the TFSA is often more advantageous.
Indeed, with a salary of less than $30,000 per year on which a young person pays very little income tax, he would have little to no tax savings if he contributes to his RRSP. On the other hand, money invested in a TFSA will generate income that would not be taxable. Once his salary is greater, he could chose to withdraw amounts from his TFSA to invest in his RRSP. And he would not lose out on his RRSP contribution rights given that they simply accumulate from year to year if unused.
Q – Ethiquette
There is no doubt that the responsible investment offering is not nearly as plentiful as the traditional product offering, but do you think that the available choice is sufficient to allow for good financial planning and the integration of social and environmental concerns?
A – Angela Iermieri
Absolutely. A large range of responsible investment financial products exist, and they offer the same return perspectives as traditional investment products. Desjardins offers a spectrum of mutual funds, including the Societerre portefolios as well as a guaranteed investment linked to the market: the Priority Terra Guaranteed Investment. It is also possible to construct a portfolio by selecting corporate shares or bonds that respond to an investor’s environmental, social and governance (ESG) criteria, within a self-directed RRSP or TFSA, through an online brokerage or with the help of an investment advisor (broker).
Which of the following Desjardins responsible investment products are RRSP or TFSA-eligible?
Fund TFSA RRSP
SocieTerra Portfolios (there are four of them) Yes Yes
*Desjardins’ Capital régional et coopératif allows participation in Québec’s economic growth by supporting the development of Québec companies , but is not RRSP or TFSA eligible. The Quebec government , however, provides tax relief through a tax credit equivalent to 45 % of the invested amount (maximum annual contribution of $ 3,000).
The Caisse d’économie solidaire Desjardins also offers it’s own (exclusive to that particular financial cooperative within the Desjardins family) responsible investment RRSP eligible products.
To learn more about Dejardins’ approach to responsible investment, consult the following: