It’s a very old discussion among professionals: is it beneficial to invest in a labor fund? These funds are generally shunned by financial advisors (they don’t get a commission if they sell them, well, well), these funds nonetheless offer a significant return for the average saver. Remember, workforce-funded funds primarily allow you to invest in Quebec’s economy while also setting aside money for retirement through your RRSP. Let’s take the example of the Fonds de solidarité FTQ and now analyze its characteristics and advantages.
• Also read: Fonds de solidarité FTQ: a positive return for the first half of 2022-2023
THE EARNINGS :
Many people persist in believing that the achievement isn’t there. It is wrong. The solidarity fund is 7% over ten years with no tax credit. That’s better than the Canadian average for balanced mutual funds, which is 4.7%, according to Fundata.
COMPARED TO UPDATED FUNDS :
Controversy persists on this front, but the tax advantage of a labor-funded fund still translates into a net gain for the saver. In a piece that caused quite a stir a few years ago, financial advisor Dany Provost provided the following calculation: A sum of $1,000 enables an investment of $1,590.27 for a single person whose income is average (marginal tax rate of $37). .12%). If the same amount were invested in a work fund, the investment increases to $3041.13, allowing for the $1128.79 tax refund and an additional $912.34 credit, for a total refund of $2041.13 is equivalent to. Obviously, the saver who wants to maximize this benefit invests his tax return instead of spending it…
THE RETURN IN CONNECTION WITH THE TAX CREDIT :
The return on the Solidarity Fund after 10 years from the tax credit is 13.4%.
THE TAX ADVANTAGE :
An investment in the Solidarity Fund offers a 30% RRSP deduction (15% federal, 15% provincial) for an annual contribution of up to $5,000 (average annual contribution was $2,900 in 2022). There is also a tax credit based on your income. Example: With taxable income of $46,295, a contribution of $2,500 results in a tax saving of $1,437.50 (under 2022 tax rules).
THE VRSP :
You may contribute to an employee fund under a voluntary retirement benefit plan (VRSP) offered in organizations with 10 or more employees.
As of November 30, more than 14,000 employers have offered them for the FTQ fund. Just ask your boss. On an income of $49,275, a deduction of $192.30 per salary (biweekly) actually costs $81.83 after tax benefits.
THE SOLIDARITY FUND IS CLOSED :
It is no longer possible to invest there through fixed contributions. On the other hand, it can be done through salary deduction. Otherwise, you can invest in FlexiFonds, mutual funds with a 30% stake in the Solidarity Fund shares that are eligible for RRSPs and TFSAs. We can cash out whenever we want.
THE CONTINGENCES OF LIFE :
Experts criticize work-financed funds for the impossibility of withdrawing your money before retirement. fake. This can occur when major life events occur (long-term disability, job loss, return to school, starting a business, RAP, etc.). For the Solidarity Fund, 80% of redemptions are made before the age of 65.
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