INVEST FOR RETIREMENT
RRSP (Registered Retirement Savings Plan)
An RRSP is a registered savings plan that allows you to build tax-free savings for your retirement while also reducing your taxable income at the time of contribution.
Contributions to the plan often begin with the first job and continue until it is converted into retirement income. In other words, the RRSP will accompany you for a large part of your life. During this time you can even use it as a down payment to buy or build your first home (HBP) or to finance a return to school for you or your spouse (LLP).
An RRSP has two advantages: It brings you tax savings when you contribute to it, and your investment income continues to grow, tax-sheltered. For each tax year, you can invest up to 18% of your income earned in the previous year in an RRSP:
| Income from previous year | Authorized contribution: 18% |
|---|---|
| $10,000 | $1,800 |
| $50,000 | $9,000 |
| $100,000 | $18,000 |
However, this rule is subject to a cap, which varies from year to year. Note that if you participate in an employer's pension plan, the contributions paid reduce your RRSP deduction limit (pension adjustment).
To find out how much you can invest in your RRSP this year, see the Notice of Assessment you received from the Canada Revenue Agency (CRA) after you filed your income tax return.
RRSP-TFSA, two complementary plans: these two plans allow you to grow your investments, tax-sheltered. From a tax point of view, one may be more advantageous than the other, or a combination of the two could be more profitable for you, depending on your situation. If you have made the maximum contribution to your RRSP and you have liquid assets, the TFSA makes good sense. Which of these two savings tools is right for you?
Eligible investments
| Available RRSP investments | Available online on My Profile |
|---|---|
| Guaranteed fixed-rate investments (GICs) | |
| Term S@vings – only available online | |
| Savings Account | |
| Market-linked guaranteed investments | |
| Mutual funds2 |
Time is money! Start saving early.
When it comes to TFSAs or RRSPs, the earlier you start saving, the more your investments grow, making the financial effort much easier. The effect of compound interest thus acts over a longer period.
Make life easier by saving in simple instalments! You choose the amount you want to invest and determine the frequency: weekly, biweekly, or monthly. This will help you adopt good savings habits, and voilà! See the result!
Calculation example based on a rate of 4% compounded annually and based on a balanced portfolio.
Take advantage of your unused RRSP contribution room: If you did not contribute the maximum allowable amount to your RRSP in previous years, you can take advantage of your unused RRSP contribution room to increase your savings, tax-sheltered, and benefit from attractive tax reductions.
But what if you do not have the money to do this? Borrowing to contribute to your RRSP can be quite an effective strategy when you apply your tax refund against your loan. In other words, the cost of the loan can be offset by the tax savings from contributing to the RRSP.
Benefit from spousal income splitting: If you expect your spouse (legal or de facto) to have lower income than yours upon retirement, it can be very beneficial to contribute to the RRSP on behalf of your spouse. You benefit from the tax deduction immediately and, upon retirement, it is your spouse who will be taxed on the withdrawals. This strategy will reduce the couple's tax bill at retirement1.
Don't delay! Open an RRSP online with My Profile in a few clicks. It's fast, easy and above all secure. Or let us advise you in the type of investments suited to your needs, your investor profile and your investment horizon. We can also offer you savings with periodic payments, which is an ideal solution for making frequent investments, but at your own pace and without upsetting your budget. Your advisor will help you develop a strategy tailored to your personal situation so that you can get the most from these two savings plans: TFSAs and RRSPs.
1. Certain conditions apply upon withdrawal. Contributions made to a spousal RRSP become the spouse’s property.
2. Mutual funds are offered through Credential Asset Management Inc. Mutual funds, other securities and securities related financial planning services are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered trademark owned by Aviso Wealth Inc.
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