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Registered Retirement Savings Plan (RRSP)

Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan (RRSP) is an investment account registered with the Canada Revenue Agency. This helps you save money without paying tax on the account until you retire. RRSP can hold a variety of investments such as GICs, mutual funds, stocks, bonds and ETFs.

A Registered Retirement Savings Plan is a retirement savings that is ideal for both employees and the self-employed people in Canada. You can save money and help it grow tax-free until withdrawal. Once you withdraw the amount you will be taxed at the marginal rate.

At our company we can help you with all aspects of RESP, from explaining the details, pros, cons and more. Speak to a member of our team now for more information, we will be happy to help you with all your needs and requirements.

What are the benefits of RESP?

  • RRSP can be converted to get regular payments when you retire.

  • You can also invest in a spousal RRSP to help reduce your combined tax burden

  • Contributions are tax deductible

  • Savings grow tax free

  • RRSP can help you buy your first home and can also be used to pay for your education.

Please note that the growth of an RRSP is determined by its contents. Juts having money in your RRSP does not guarantee that you will retire comfortably. This only ensures that your investments will be let to grow without being taxed, as long as the amount is not withdrawn.

Understanding Registered Retirement Savings Plans (RRSP)

Registered Retirement Savings Plans was created in 1957 as part of the Canadian Income Tax Act.2 This is registered with the Canadian government and isalso monitored by the Canada Revenue Agency (CRA). The Canada Revenue Agencysets several rules for RRSP such as the annual contribution limits, timing, and assets allowed.The government of Canada provided thistax-free account to help encourage them to save for their retirement.

RRSPs have several advantages, one the main reason people invest in a RRSP account is that it has tax advantages. The growth of RRSP investments is tax-deferred. Unlike with other investments, the returns you avail from RRSP are exempt from any capital gains tax, dividend tax, or income tax.

Types of RRSP

There are a several types of RRSP types, the most common ones are individuals, spouses and group RRSP accounts.

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    Individual account:

    An Individual RRSP account is created by a single person. This person is both an account holder and the contributor. He pays certain amount towards the account and over years during his retirement can reap its benefits.

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    A Spousal RRSP:

    This Spousal RRSP provides tax benefit for both spouses. One of the higher earning spouses can contribute to a spousal RRSP in their spouse's name, during retirement the amount will be divided evenly, here each spouse will benefit from the lower marginal tax rate.

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    A Group RRSP:

    Your age, gender, profession, health condition, smoking status- these also play a crucial role in determining the premium value of your policy premium amount.

What is the type of investment allowed in RRSP?

Several types of investment are permitted in RRSPs. They include:

  • Mortgage loans

  • Income trusts

  • Guaranteed investment certificates

  • Foreign currency

  • Mutual funds

  • Exchange-traded funds

  • Equities

  • Bonds

  • Savings accounts

Contribution and withdrawal of RRP

There are rules and limitations for the contribution for RRSP accounts.

  • The RRSP contribution limit is 18% of the earned income, up to a maximum of $27,230.

  • You can contribute more, however additional sums over $2,000 will be penalised.

  • Amount from this account can be withdraw at any age.

  • The money withdrawn will be taxed, unless you are withdrawing the money to buy a home or for your child’s education.

Other key points to make note of

  • When the RRSP holder turns 71 the amount must be shifted to a Registered Retirement Income Fund (RRIF)

  • RRIF is similar to an annuity contract and can be used to pay a single beneficiary or a number of beneficiaries.

  • Money withdrawn from an RRSP through RRIF account is taxed.

  • The account holder may also receive a monthly Canada Pension Plan.

Trusted company

At our company we understand that RRSP can be confusing and you may have many questions to ask. You can always rely on us to offer valuable and reliable advice regarding RRSP. We will provide you all details about the amount that can be invested, withdrawn and more. Speak to a member of our team now. We will be happy to help you with all your needs.

Wish to invest in RRSP account? Need more details? Give us a call today, we will be happy to help.