Registered Retirement Savings Plan is a retirement plan that you or your spouse or common-law partner establish and contribute to. RRSP contributions are tax-deductible;ie, it can be used to reduce your income tax.

RRSP vs CPP

Why should I invest in RRSP when I can get CPP (Canada Pension Plan) benefit at retirement?
Reason: CPP – small plan, big potential?!

RRSP vs TFSA

What are the differences between RRSP and TFSA (Tax-Free Savings Account)?
See this article: RRSP vs TFSA.

RRSP vs IPP

For anyone who has reached their annual RRSP maximum limit and would like to attain more tax-deductible retirement savings than what their RRSP can offer, it is POSSIBLE with IPP option which allows an even more attractive contribution room than RRSP does!
See this article: IPP – Supersize Your Retirement Savings.

RRSP Contribution Deadlines

March 1 of the following year is the deadline for contributing to an RRSP for the current tax year; eg, March 1, 2010, is the deadline for 2009 tax year.

December 31 of the year you turn 71 is the last day that you can contribute to your RRSP.

How does the Government Calculate My RRSP Contribution Room?

It’s based on your “earned income,” not Total Income (line 150), Net Income (line 236), Taxable Income (line 260), or Gross Income.
See this article: How to Calculate RRSP Contribution Room.

How Much Do Others Contribute To Their RRSPs?

See this article: RRSP – national average annual contribution.

What Types of Investments is Better for RRSP?

RRSP is a registered plan; ie, the income earned is tax-deferred till you withdraw the fund during your retirement when your income will be in the lower tax bracket. Because of this, it is better to place RRSP in the investments that generate interest income which can be taxed as high as 45%, according to your tax bracket of that year.

In contrast, although investment earnings outside a registered plan are taxable, you can reduce the tax on investment income by focusing on investments that generate primarily dividends and capital gains, which are taxed less heavily than interest income. The tax on dividends and capital gains is usually around 25%.

What Can You Do With Your RRSP Fund?

• Home Buyer’s Plan (HBP): Withdrawing your RRSP funds to buy or build a qualified home.
• Lifelong Learning Plan (LLP): Withdrawing your RRSP funds for continuing education or retraining.
• Registered Retirement Income Fund (RRIF): Transferring your RRSP funds to RRIF when you turn 71.

What Others Are Reading…

• My Networth: June 2009
• My Networth: May 2009
• My Networth: April 2009
• My Networth: August 2009
• My Networth: July 2009

I wonder…what is the maximum CPP benefit that an eligible senior can get? Below is some info I find out about CPP.

Features of CPP

• CPP is a pension for working in Canada, as opposed to OAS (Old Age Security) pension for living in Canada.
• CPP contribution is compulsory for anyone who works in Canada.
• In year 2009, the maximum CPP retirement pension is around $910 per month if taken at the age of 65.
• CPP does not start automatically. You have to apply in order to receive it. This sounds a bit contradictory because your contribution is automatic and yet your pension is not automatic.
• From my personal perspective, CPP should not be considered a benefit, because you “pay” for it through your contribution deducted from your pay cheques.
• You can find out your CPP Statement of Contributions as well as your estimated CPP pension when you turn 65 on Service Canada website.
• CPP contributions are tax-deductible; however, CPP pensions are taxable incomes. Sort of like “Tax-deferred”.
• CPP contribution rates are 9.9% for self-employed and 4.95% for employee. (See contribution rate table)

What Others Are Reading…

• My Networth: June 2009
• RRSP – Maximize Your Retirement Savings
• My Networth: May 2009
• My Networth: April 2009