2017-03-15 00:00:00BookkeepingEnglishDiscover the benefit of using an activity-based costing system, how to use cost drivers, and how this system can help you with product...https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Small-business-owner-in-surf-retail-store-reviews-activity-based-costing-near-paperwork-clothing-and-laptop.jpghttps://quickbooks.intuit.com/ca/resources/bookkeeping/how-to-use-activity-based-costing/Assigning Costs: How to Use Activity-Based Costing

How to Use Activity-Based Costing

2 min read

The right retirement savings strategy can help you save a substantial amount in taxes when it’s time to withdraw your money. With that in mind, a tax-free savings account (TFSA) is one of the best tax-shielding options you have. With a TFSA, you pay taxes when you make contributions to the account, which makes withdrawals tax-free regardless of how much you earn. You can keep your money in a TFSA for as long as you want, because no regulations forcing you to withdraw it.

## Taxes on Non-Registered Investments

Since you don’t pay taxes on earnings with a TFSA, it makes sense to first sell your non-registered investments when [planning your retirement](https://quickbooks.intuit.com/ca/resources/insurance-benefits/retirement-plan-small-business-owners/). Because you need to pay taxes on your returns from a non-registered investment, your tax bill increases as you earn more money. It may not seem like a big deal now, but compound interest can grow your returns for years or decades down the road. This means you’re likely to have a substantial amount awaiting you when you decide to retire.

## Funding Your TFSA With Non-Registered Investments

When considering your retirement savings options and [succession plan](https://quickbooks.intuit.com/ca/resources/future-planning/develop-succession-plan-small-business/), factor in the amount you’re likely to make over time. For example, if you have $20,000 in income with your non-registered investment, taxes can take a big chunk out of your return. The smart plan in these instances is to liquidate non-registered investments early, and use them to fund your TFSA so long as it doesn’t bump you into a higher tax bracket for the year. Though your TFSA might not have as large a rate of return as your non-registered investments, you need to factor in potential tax costs when deciding on your preferred rate of return.

## Maximizing Your TFSA Contributions

You can contribute up to $20,000 per year per the Canada Revenue Agency’s (CRA) guidelines. This means that the first $20,000 you save per year should go into your TFSA rather than taxable investments. This not only ensures you have plenty of money for when you retire, but it also significantly lowers your tax bill.

Retirement planning strategies that maximize your savings while minimizing your tax bill make sense both now and for the future. By planning ahead, you take the worry out of moving into your golden years because you have enough not just to survive but to thrive. The [QuickBooks Self-Employed](https://quickbooks.intuit.com/ca/self-employed/) app helps freelancers, contractors, and sole proprietors track and manage their companies on the go, and can also help as you save money for your retirement fund. Download the app today and take control of your financial future.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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