RRSPs
A Registered Retirement Savings Plan (RRSP) is a personal savings plan registered with the Canadian Federal Government allowing you to save for the future on a tax-sheltered basis.
Think of an RRSP as an investment portfolio. It can contain a variety of investments including: savings deposits, treasury bills, guaranteed investment certificates (GIC), mutual funds, bonds, Canadian equities and even foreign equities and bonds.
What makes RRSPs special is that your contributions to it are tax deductible and your portfolio grows tax sheltered.
Setting up an RRSP
You can set up a Registered Retirement Savings Plan through a financial institution such as a bank, credit union or insurance company. Your financial institution will advise you on the types of RRSP and the investments they can contain.
You may want to set up a spousal or common-law partner RRSP. This type of plan can help ensure that retirement income is more evenly split between both of you. The benefit is greatest when a higher-income spouse or common-law partner contributes to an RRSP for a lower-income spouse or common-law partner. The contributor receives the short term benefit of the tax deduction for the contributions, while the annuitant, who is likely to be in a lower tax bracket during retirement, receives the income and reports it on his or her tax return.
There is also a Self-Directed RRSPs if you prefer to build and manage your own investment portfolio by buying and selling a variety of different types of investments.
Another consideration is a Locked-in RRSP. In most cases, you will not be able to withdraw funds from a locked-in RRSP. Locked-in refers to the restrictions and limitations that are imposed by the Pension Benefit Act for each province and territory. The locked-in RRSP is designed to preserve pension assets for your retirement. Money put into your locked-in RRSP usually is the transfer value of pension benefits you have built up in your former employerÂ’s pension plan, which you asked to be moved when you terminate employment or plan membership.
If you are 69 years or younger you can contribute to an RRSP. There is no minimum age.
The year you turn 69 is the last year that you can contribute to your RRSPs.
You can contribute to a spousal or common-law partner RRSP if your spouse or common-law partner is 69 or younger on December 31 of the year you make the contribution.
By the end of the year you turn 69, you have to choose one of the following options for your RRSPs:
- Withdraw them
- Transfer them to a RRIF
- Use them to purchase an Annuity for life
- Use them to purchase an Annuity spread over a number of years.
When you withdraw funds from your RRSPs, your RRSP issuer will withhold some tax.
If you have taxable income you will benefit from this plan.
For more detailed information, please contact us.