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What is an RRSP?

An RRSP is short for Registered Retirement Savings Plan. It's a well-known phrase for good reason: an RRSP is one of the best ways to save for your retirement and save on taxes at the same time.

Some people think that an RRSP is an investment or something that you purchase. It's neither. An RRSP is a government-approved account specially designed to help you save money for your retirement.

Consider an RRSP Loan to get you started.  Here's a great article to explain how this works!

Follow these guidelines to make smart contributions:
  • Who can contribute: Canadian residents under the age of 71 with employment income and a tax return can contribute to an RRSP.
  • Max contribution: 18% of earned income you reported on your tax return in the previous year, up to a maximum of $27,830 For 2022, the contribution limit is $29,210.
  • Unused contribution room: If you have unused contribution room at the end of the year you can carry it over and use it next year.
There are tax consequences to withdrawing from your RRSP before you retire, so try to avoid it. 
If you withdraw early, the money you take out will be subject to a withholding tax and it’s counted as part of your income for that year (meaning you pay income tax on it). There are a couple of exceptions:
You can borrow from your RRSP to help pay for your first home under the federal Home Buyers' Plan. You can also use money from your RRSP to pay for training or education as part of the federal Lifelong Learning Plan.

Registered Retirement Savings Plan

We have the answers to your questions!
A Registered Retirement Savings Plan (RRSP) is a government approved savings plan allows you to save money for your retirement.  Your contributions are tax deductible and the income in your investment is tax deferred until it is withdrawn from your RRSP Plan. 

You can hold a variety of investments in your RRSP.  Vermilion Credit Union offers a range of investment options and has a Certified Financial Planner and Financial Services Advisors on staff to help you get the most from your investments and your retirement.  
All tax payers who have earned an eligible income, up to the end of the year they turn 71, may contribute to an RRSP.  There is no minimum age and you may have more than one plan.
An RRSP helps to ensure you have money for retirement.  It also has advantages when you are still in your working years by providing a tax deduction.  There are a number of different types of investments within an RRSP Plan so you can maximize the benefit to meet your retirement goals.  Knowing you are taken care of in retirement gives you one less thing to worry about!
The government determines your contribution limit based on your earned income.  You can find your contribution limit on your Notice of Assessment or by going to the CRA website and logging into My Account.  The annual RRSP contribution limit is 18% of your last year's income, up to a maximum amount - whichever is smaller.  

It is important to note that there are penalties for over contributing to your RRSP, so be sure to check you limits.
When you retire, your RRSP turns into a RRIF (Registered Retirement Income Fund) that you can withdraw money from.  You must convert your RRSP to a RRIF by the end of the year you turn 71.  You can withdraw funds before retirement, but the withdrawals will be subject to income tax and withholding tax, and you will permanently lose that contribution room.  
Exceptions to the RRSP early withdrawal penalties are the Home Buyer's Plan, which allows you to withdraw up to $35,000 for the down payment of your first home, and the Life Long Learning Plan, which allows you to withdraw up to $10,000 in a calendar year from your (RRSPs) to finance full-time training or education for you or your spouse or common-law partner.
Contributions may be made to a spousal plan within the contributor's RRSP contribution limits.  This strategy can potentially create income splitting between spouses in retirement.  
Did you know you can borrow money to contribute to your RRSP?  Because RRSP contributions reduce your taxable income, and early contributions maximize compound interest, an RRSP loan may be to your financial benefit.  

Ready to set up an RRSP?

We can help with getting you set up an RRSP and let you know which investments can be held within it. Call 780.853.2822 today to book an appointment to start saving for your retirement.
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