What’s an RRSP
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?
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.