Tools and Resources
A Registered Retirement Savings Plan (RRSP) is an investment account that allows you to save money for your retirement while lowering your income tax. Contributions are deducted from your annual income to reduce the amount of income tax you must pay for that year. Careful planning is key to maximizing the benefit of an RRSP. You may choose a Spousal RRSP, for example; or you might choose to put some funds into an RRSP, while directing other savings to a TFSA.
Choose from a range of RRSP investment options that give you both stability and growth. Your mutual funds, GICs, and more can be ‘registered’ to invest in an RRSP.
Each year there is a limit to the amount you may contribute to your RRSP. This amount can be found on your notice of assessment issued by Canada Revenue Agency.
Planning for your retirement is an ongoing theme through your entire working life. After all that hard work, retirement is approaching and you have some decisions to make. When you retire, you still need an income and that money can come from many sources—so you have some decisions to make. Where to start?
Canadian tax law requires that you convert your RRSPs and other pension savings into retirement income by December 31st of the year you turn 71, and you must begin withdrawals the following year.
One way to manage withdrawals from your RRSP is a Registered Retirement Income Fund (RRIF). Once you start drawing income from your savings through a RRIF, your investment will continue to earn a return while withdrawals are made from the account, and this new income stream will be managed in a tax-efficient way. The funds withdrawn can be used to supplement your spending needs or reinvested for future use.
Each option has different tax implications and can impact how long your funds will last.
You may choose to convert your RRSP to a RRIF, which comes with many benefits and allows you to take advantage of your choice to save for retirement in an RRSP in the first place.
You may choose to convert your RRSP to an annuity, which is a type of insurance that provides a regular income source for a particular time period or even for life.
Although not recommended, you may withdraw funds from your RRSP in a lump sum. This is rarely a good idea, as your income tax bill for the year will be significant. Plus, you will miss out on many of the benefits designed into registered savings plans.
If you haven’t been making the maximum allowable contribution to your RRSP every year, you probably have unused contribution room. You can get an RRSP Loan to make up the difference, and your catch-up RRSP contribution may result in an additional tax refund that can then be used to pay down your RRSP Loan. To find out more, meet with a member of our Wealth and Investment Team.
The Home Buyers’ Plan is a program that allows you to withdraw funds from your RRSP to buy or build a qualifying home for yourself or for a related person with a disability.
The Lifelong Learning Plan allows you to withdraw funds from your RRSP to finance full-time training or education for you or your spouse or common-law partner.
Pre-authorized payments to your RRSP make it so much easier to save. Contribute every month and watch your savings add up!