Saving for Retirement

A Registered Retirement Savings Plan (RRSP) is a savings plan, registered with the Canadian federal government that you can contribute to for retirement purposes. When you contribute money to a RRSP, your funds are "tax-advantaged", meaning that they're exempt from being taxed in the year you make the contribution. Any investment income earned from investments held within the RRSP can then grow tax-deferred, as long as the money remains within the RRSP, until it's withdrawn. RRSP contributions are tax-deductible, meaning that they can be deducted on your current year tax return, potentially reducing the total amount of taxes you pay.RRSPs are primarily designed for retirement savings, but they can also be used to help you buy your first home or go back to school. Unused contribution room can be carried forward. RRSPs can hold a variety of qualifying investments, including guaranteed interest products, mutual funds, segregated fund contracts, bonds and equities.

What types of RRSPs are available?

  • Individual RRSP: The most common type of RRSP is a plan registered in your name. The investments held in the plan and all the tax benefits belong to you.
  • Spousal RRSP: When you contribute to a spousal RRSP, you still get the tax deduction but the plan is registered in your spouse's name. (Your spouse's contribution limit to his or her own plan is not affected.) It’s a great income-splitting option if one of you earns more than the other.
  • Locked-in RRSP: If you leave your employer before you retire, you may be offered the option to manage your vested pension funds. A Locked-in RRSP - as the name suggests, investments held in this plan type are locked in and generally, cannot be withdrawn before retirement.
  • Group RRSP: Some employers offer a Group RRSP, a collection of individual RRSPs for the company’s employees. As an employee, your RRSP contributions are taken from your pre-tax pay through payroll deductions, reducing your tax burden immediately.

How much can I contribute to an RRSP?

There are contribution limits on RRSPs. To find out the exact amount you can contribute for the current year, check the most recent Notice of Assessment you received from the CRA. As a guideline, your allowable RRSP contribution for the current year is the lower of:
  • 18% of your earned income from the previous year
  • The maximum annual contribution limit for the tax year
  • The remaining limit after any company sponsored pension plan contributions
Interested in taking the lead on your retirement savings strategy? Contact Insurepedia Advisor today for a wide range of investments and innovative tools to help you build your portfolio.

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