Investing basics

Access the Long-Term Investing brochure for an overview of the benefits of staying invested for the long term, keeping focused on the big picture and choosing the right investments. Investors require a portfolio solution that can deliver strong long-term investment returns that outpaces Canadian’s annual cost of living increases.

The longer the time horizon, the better the investor is able to cope with the day-to-day market noise (or volatility). More often than not, focusing on headlines and daily market volatility can serve as a distraction and might derail the investor from seeing the big picture.

Whether it is to save for their retirement, a dream home, or their child’s post-secondary education, every investor has their own personal investment goals. Most importantly to help reach those goals, it’s best to start with a plan and consider these strategies when investing for the long-term.

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Will I be ready to retire when I want to?

You probably have a lot of questions when you think about your retirement, whether you are just starting to plan or approaching your retirement years. The answers will be largely dependent on your personal situation. One thing common to all investors the best way to start saving for your retirement is to open a RRSP (Registered Retirement Savings Plan), a registered account created by the Government of Canada to allow you to save on a tax deferred basis for your retirement.

Tax sheltered investment growth

You don’t pay taxes on the growth of your investments held in an RRSP until you redeem or switch your investments out of the plan. This makes a big difference in the growth of your investments over time. You will be taxed on the income earned on your investments when you withdraw it from your RRSP, but it is likely you will be in a lower tax bracket in your retirement years.

Diversify your Investments

Your contributions to an RRSP (up to your contribution limit) are deducted from your previous year’s taxable income.

Reduce Yearly Income Tax

Your contributions to an RRSP (up to your contribution limit) are deducted from your previous year’s taxable income.

RRSP Application

RRIF Application

Registered Education Savings Plan (RESP)

If you have children, the answer could be to use it to pay for your child’s post-secondary education. While the amount seems overwhelming, the best way to prepare is to create a plan, stick to it and incorporate a few key strategies.

What would you do with $60,000?

If you have children, the answer could be to use it to pay for your child’s post-secondary education. While the amount seems overwhelming, the best way to prepare is to create a plan, stick to it and incorporate a few key strategies.

Contributions limits

There is no annual maximum RESP contribution, but there is a lifetime contribution limit of $50,000 for each beneficiary. Contributions to an RESP are not tax-deductible, but income earned in an RESP is normally not taxed as long as it stays in the RESP. The student will generally pay tax on the amount of income and government incentives withdrawn from the RESP – these are called “educational assistance payments”. The contributions to the RESP can generally be withdrawn tax-free.

Invest early

You can open an RESP and start saving for a child’s education as soon as they are born, provided they are eligible. This provides up to 18 years of tax free growth.

Save through a Pre-Authorized Contribution (PAC)

A PAC is the best way to save to ensure you meet you financial goals. It is a convenient, worry free way to ensure you are saving on consistent basis. PAC’s are flexible in that you can choose the frequency and have low investment minimums. Even investing small amounts regularly adds up over time.

Invest appropriate to your time horizon

There are many types of investment products that can be held in an RESP, including equity, balanced and bond mutual funds and GICs as well as cash savings. The allocation of your portfolio may change as the time your child needs the money approaches.To simplify the investment decision, BMO Mutual Funds offers a suite of Target Education Portfolios. These five portfolios automatically shift from equities to fixed income as their target end date approaches ensuring they maximize growth in the early years and help to reduce volatility as post-secondary education nears.

Open a Registered Education Savings Plan (RESP)

There are many savings vehicles you can use to save for your child’s education, only an RESP provides tax deferred growth, combined with the ability to earn Canada Education Savings Grant (CESG) and various other Federal and Provincial incentives. Eligible plans receive annual grants matching 20% of contributions made each year, up to a maximum of $500 per year or $1,000 if carryover room is available. The lifetime maximum CESG limit per child is $7,200.

RESP Application

Registered Disability Savings Plan (RDSP)

Created by the federal government, the RDSP provides people with disabilities with an easy and effective way to save and invest for their long-term financial security. What’s more, the government offers incentives in the form of grants and bonds to help you accumulate more. If you are a person with a disability or provide care to someone with a disability, you’ll definitely want to know more about RDSPs.

Why open an RDSP?

Caring for someone with a severe or prolonged disability can be emotionally and financially challenging. A BMO Registered Disability Savings Plan (RDSP) is one component that can help to provide long-term financial security for people with disabilities.

How can a Disability Savings Plan help?

RDSPs have three important advantages:

• As a registered savings plan, earnings grow tax-free until money is withdrawn. This means RDSP contributions can grow faster, helping to accumulate more in the plan.

• RDSPs may be eligible for government incentives of up to an annual amount of $3,500 to a lifetime maximum of $70,000 in grants and an annual amount of $1,000 to a lifetime maximum of $20,000 in bonds, which can substantially boost an RDSP’s value.

• Income payments from RDSPs do not affect income-tested federal government programs, including Old Age Security, the Guaranteed Income Supplement and the Canada Pension Plan. In most provinces and territories, you will still qualify for existing provincial social assistance programs if you have an RDSP.

Who can take advantage of an RDSP?

Anyone who is eligible for the Disability Tax Credit may be the beneficiary of an RDSP. To qualify, the beneficiary must:

• Be a Canadian resident.

• Have a valid Social Insurance Number.

• Be under the age of 60.

• Complete a Disability Tax Credit Certificate (Canada Revenue Agency Form T2201) with the assistance of a qualified practitioner and receive notification of approval from the Canada Revenue Agency.

Who can contribute?

Anyone can contribute to an RDSP as long as they have written permission from the account holder. There is no annual limit on contributions and the lifetime maximum is $200,000.However, contributions must cease when any one of the following is met: by the end of the year in which the beneficiary reaches age 59, or when the beneficiary no longer lives in Canada, or when the beneficiary no longer qualifies for the Disability Tax Credit, or when the beneficiary dies.Consider making automatic RDSP contributions at regular intervals throughout the year – you will find it easier on your budget and a convenient way to reach your target annual contribution amount. Keep in mind that the sooner your money is invested in an RDSP, the longer it has to grow tax-deferred.

Government grants and bonds

There are two types of government incentives available through RDSPs. The Canada Disability Savings Grant can add an annual amount of $3,500 up to a lifetime maximum of $70,000 to an RDSP. The Canada Disability Savings Bond can add up to an additional $1,000 annually to an RDSP to a lifetime maximum of $20,000. How much you are eligible to receive in grants and bonds will depend on the family income of:

• the beneficiary (and spouse, if applicable), beginning in the calendar year the beneficiary reaches age 19.

• the beneficiary’s family, up to and including the year in which the beneficiary reaches age 18.

Plan contributions to maximize grants and bonds

Grants and bonds are only available until the end of the calendar year in which the beneficiary reaches age 49, so plan your contributions to maximize these incentives. Don’t worry if you are late in setting up your RDSP or miss making a contribution. Beginning in 2008 and for a maximum of 10 years, unused grants and bonds are carried forward, giving you the opportunity to catch up by contributing more than $3,500 a year. Note that when catching up, the maximum payable in any one year is $10,500 for grants and $11,000 for bonds.No additional forms need to be filled out. You will receive past grants and bonds as long as you were eligible for the Disability Tax Credit in the years for which you intend to catch up and your tax returns were filed for the two years prior to each year you intend to receive past grants/bonds. You need only contribute the correct amount to receive all of the grants/bonds to which you are entitled.

RDSP investment options

All our BMO Mutual Funds are available to be held inside your RDSP account with the exception of any funds denominated in U.S. Dollars.

RDSP Application

Tax Free Savings Account (TFSA)

A TFSA, or Tax-Free Savings Account, is a Canadian investment account that allows individuals to save and invest money tax-free. Contributions are not tax-deductible, but withdrawals, including investment gains, are tax-free. It’s a flexible way to save and invest for various goals, offering a valuable tax advantage for Canadian investors.

TFSA APPLICATION