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What is an RRSP?

A Registered Retirement Savings Plan (RRSP), or Retirement Savings Plan (RSP), is a tax deferred account to save for retirement. RRSPs were introduced in 1957 to promote savings for retirement by every working Canadian.

They must comply with various guidelines stipulated in the Canadian Income Tax Act. There are various types of assets that can be held.They include savings accounts, guaranteed investment certificates (GICs), bonds, mortgage loans, mutual funds,and other more exotic investments.Rules determine the maximum contributions, the timing of contributions,and the conversion to a Registered Retirement Income Fund (RRIF) or a guaranteed life annuity or a term certain annuity.

What are the tax advantages of RRSP investing?

The income earned in your RRSP is not taxed until it is withdrawn. Their growth is tax sheltered and so the total value may grow more quickly. By the time you begin to start withdrawing the funds,hopefully you will have a considerable amount of money.

How does an RRSP affect my taxes?

Contributions are tax deductible after you put the money in and claim a tax deduction. You defer paying tax on the money and any gains.

Are there capital gains tax on an RRSP?

Tax plays an important part if you have investments inside and outside of your RRSP. Remember that income earned and capital gains realized in your RRSP are not taxed until they are withdrawn. Tax is payable immediately on realized gains outside the RRSP.

What are the main RRSP advantages?

The 3 main tax advantages are:

1. Tax-deductible contributions – You get immediate tax relief by deducting your RRSP contributions from your income each year.

2. Tax-sheltered earnings – The money you make in your RRSP money is not taxed immediately

3. Tax deferral – You’ll pay tax on your RRSP savings of capital and interst earned when you commence withdrawls. Your marginal tax rate may be lower in retirement than it was during your contributing years.

What are the contribution limits?

Anyone who has earned income can open and contribute to an RRSP. The limits on how much you can contribute to an RRSP can change each year. As of 2017 you can contribute the lower of:

- 18% of your earned income in the previous year, or

- the maximum contribution amount for the current tax year: $25,370 for 2016.

If you are a member of a pension plan, your pension adjustment will reduce the amount you can contribute to your RRSP.

Can I carry forward unused contributions?

If you don’t have the money to contribute every year, you can carry forward your RRSP contribution room and use it in the future.

How long your RRSP can stay open?

You must close your RRSP in the year you turn 71. You can withdraw your RRSP savings in cash, convert your RRSP to a RRIF or buy a Term Certain or Life Annuity.

Where do you open an RRSP account?

It is best to use a broker who can help you,but otherwise you can try the following institutions A.Banks and trust companies B.Credit unions and caisses populaires C.Mutual fund companies D Life insurance companies

Take action

Use this RRSP form to figure out how much you need to save for retirement.

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