RRSP

Everything about RRSP Plan

Registered Retirement Savings Plan or RRSP is established by your government to provide a way for you to face retirement. They want you to save for retirement. So make use of this opportunity by getting a RRSP plan as future security for you and your family.

About RRSP

• A Canadian account that holds savings and investment assets.
• Provides better benefits compared to investing outside of tax-preferred accounts;
• Starting in1957, it has been promoting savings for retirement by employees and self-employed people.
• It has complied with a variety of restrictions stipulated in the Canadian Income Tax Act.
• Approved assets include: (i) savings accounts; (ii) guaranteed investment certificates (GICs) bonds; (iii) mortgage loans; (iv) mutual funds; (v) income trusts; (vi) corporate shares; (vii) foreign currency; and (viii) labor-sponsored funds.
• Rules determine: (i) maximum contributions; (ii) the timing of contributions; (iii) the assets allowed; and (iv) the eventual conversion to a Registered Retirement Income Fund (RRIF) at age 71.
• RSSP withdrawal of funds allowed with reasons.

Three questions about RRSP.

1. What is an RRSP contribution?
An RRSP plan is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP plan contributions can be used to reduce your tax.

2. Is interest earned on RRSP taxable?
RRSP contributions are deducted from your total income; annual income tax payable is reduced to claim contributions. Income earned in the account is not taxed that includes capital gains, dividends, foreign gains interest, mortality credits, etc..

3. What about withdrawals?
RRSP withdrawal is not allowed for anything other than retirement, post-secondary education expenses or the purchase of a home.

Why open an RRSP

• Contributions are tax deductible
RRSP contribution can be deducted from your tax return. If your income is lowered for the year, you can have your deduction payable in future year when your income may be higher. This is the way for your tax savings to be greater when you’re in a higher tax bracket.
• Free tax increases savings
Savings grow tax free. You won’t pay any tax on investment earnings as long as they stay in your RRSP. Your savings will grow faster with this compounding that is tax-free.
• You RRSP can be converted as regular payments when you retire
Convert RRSP taxi free savings to an annuity or RRIF by your retirement. Regular payment for income received each year will be paid. However, you will pay lesser tax when you are in a lower income tax bracket upon retirement.
• A spousal RRSP plan reduces combined tax burden
If your income is more than your spouse, you can save tax payment thru spousal RRSP. Your retirement income will be divided equally into 2 that reduce the total tax amount you pay.
• RRSP withdrawal is allowed for
Withdraw of funds is only allowed for retirement purposes as post-secondary education expenses, purchase of a home and education.

You do not need to pay tax for RRSP withdrawal as long as the money is back within the specified time periods.
Getting RRSP plan is a win-win investment all the way. Through the assistance of your government, you have the opportunity to face your financial obligation with security during your years of retirement.