5 Reasons to Open an RRSPCliff Broetz, CSA, Wealth Advisor
A Registered Retirement Savings Plan (RRSP) is an account, registered with the federal government, that you use to save for retirement. There are a number of benefits to saving in an RRSP.
1. Contributions are tax deductible
You claim your RRSP contribution as a deduction on your tax return. And if your income is lower in a year, you can carry forward the deduction for your contribution to a future year when your income may be higher. That way, your tax savings are greater when you’re in a higher tax bracket.
2. Savings grow, tax deferred
You won’t pay any tax on investment income earned inside your plan. This is tax-free money, including the compounding. A way to grow your money faster. Instead of spending the money you make investing, you reinvest it so it can grow.
3. You can convert your RRSP to get regular payments when you retire
You can transfer your RRSP savings tax free into a Registered Retirement Income Fund (RRIF) or an annuity when you retire. You’ll pay tax on the regular payments you receive each year — but if you’re in a lower tax bracket in retirement, you’ll pay less tax. And you’ve potentially had years of tax deferred growth.
4. A spousal RRSP can reduce your combined tax burden
If you earn more money than your spouse, you can help build their tax-free savings by contributing to a spousal RRSP. Retirement income will then be split more equally between the 2 of you — which may reduce the total amount of tax you pay.
5. You can borrow from your RRSP to buy your first home or pay for your education
You can take out up to $25,000 for a down payment for your first home under the Home Buyers’ Plan (HBP). You can also take out up to $20,000 to pay education costs for you or your spouse under the Lifelong Learning Plan (LLP). You won’t pay any tax on these withdrawals as long as you pay the money back within the specified time periods.
RRSP’s are one of the best tax planning tools in addition to having powerful long term income benefits. We are here with investments or term deposits to put inside your plan. The DEADLINE is rapidly approaching in March. Please let us know how we can help.