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RRSP
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What Is Registered Retirement Savings Plan (RRSP)
A Registered Retirement Savings Plan (RRSP) is a registered savings account launched by the Canadian Government. The account is monitored by the Canada Revenue Agency (CRA). Any Canadian resident or permanent citizen can open an RRSP account. The Canadian government launched RRSP in the year 1957 intending to motivate Canadians to save for their life post retirement. RRSP is a great investment vehicle and offers great features. RRSP also offers tax-benefit.
Eligibility Criteria For Opening An RRSP Account
- You must be a Canadian Citizen or permanent resident.
- You must be above 18 years of age and open an RRSP till you are 71.
- Has filled taxes last year.
- Have Social Insurance Number.
- You need to be employed be it a job or running a business.
- You can open an RRSP even if you are below the age of 18 years if you have consent letter either from parents or local guardians.
There are different types of RRSP accounts available that you can opt for depending upon your convenience and needs.
Type Of RRSP Account You Can Open
1. Individual RRSPs: You can open this type of RRSP individually under your name. You will be the only person who can contribute to this account.2. Group RRSP: This type of RRSP account is commonly opened by employers for benefit of their employees. Employees will contribute and save for their retirement.3. Spousal RRSP: You can open this type of RRSP account in your spouse or legal partner’s name. You are eligible to contribute and can also avail tax benefits. Select the account that suits your needs the best. You can take the advice of professional financial advisors.
All About RRSP And Benefits It Offers
- RRSP is a savings account designed specifically to keep you independent after you get retired.
- The contributions you make are tax-free.
- RRSP decreases your taxable income.
- RRSP help you earn depending upon the contribution you make.
- There is an annual contribution limit to the RRSP account.
- You can deposit a maximum of up to 18% of your last year’s income. With increasing income, the contribution limit will also increase.
- You can get tax-deferred on the income you earn through investment till you make a withdrawal.
- When you make withdrawal, you have to pay tax on the withdrawal amount.
- Tax charges will depend upon the income you earn in the year you make the withdrawal.
- Withdrawal made for buying your first home or if you or your spouse enroll on an education program is tax-free.
- You can make withdrawals anytime and at any age.
- The amount you withdraw will not be restored in your contribution limit and will be permanently removed from your contribution room.
- An RRSP account cannot be seized by any creditor against any type of personal liability.
- The maturity age for an RRSP account is 71.
- It is possible to convert an RRSP account into a Registered Retirement Income Fund (RRIF) or you can take an Annuity or lump sum payout after maturity.
- It is mandatory to make a withdrawal of a minimum amount annually once RRIF is set.
- The withdrawal you make from RRIF will be taxable and impacts income-tested government benefits and credits.
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