Retirement Planning (RRSP)
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Lower your taxes while growing your nest egg for retirement!
A Registered Retirement Savings Plan (RRSP) is a government-regulated investment account with special tax benefits to help you maximize your retirement savings. Deductible contributions to an RRSP help reduce your taxes, and any income you earn on your investments while in the plan grow tax-deferred.
Aside from the obvious benefit of saving for your retirement, RSPs also have the following advantages:
- Contributions are tax-deductible and may result in a tax refund.
- Returns earned on RSP investments accumulate tax-deferred inside the plan.
- You can contribute anytime throughout the year and up to 60 days after the end of the year.
- When you withdraw money at retirement, you may benefit from a lower tax rate.
- In general, you can contribute either 18% of your previous year’s earned income – subject to a dollar limit – plus any unused RSP room carried over from previous years, less pension adjustments, for the previous tax year. To find out what are the RSP contribution limits for this and the past years, please visit the Canada Revenue Agency website.In general, you can contribute either 18% of your previous year’s earned income – subject to a dollar limit – plus any unused RSP room carried over from previous years, less pension adjustments, for the previous tax year. To find out what are the RSP contribution limits for this and the past years, please visit the Canada Revenue Agency website.
You can contribute Until December 31st of the year you turn 71.
Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan. December 31 of the year you turn 71 is the last day that you can contribute to your RRSPs.
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 if 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.