Canada Life Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan helps find your retirement by providing short and long-term tax advantages.

Registered Retirement Savings Plan (RRSP)

The foundation of your retirement

A Registered Retirement Savings Plan helps find your retirement by providing short and long-term tax advantages.

Pay less tax initially

Contributions made towards your RRSP help you pay less income tax while saving for your retirement.

Keep more of your investments

With an RRSP, you don’t have to pay taxes on the growth of your investments, until you withdraw them.

Help buy your dream home or fund your child’s education

The money earned from RRSPs can be used to pay for your child’s post-secondary education or fund your dream home etc.

What is an RRSP?

It is a retirement savings account registered with the Canada Revenue Agency (CRA) that provides Canadian individuals with tax-free benefits to save for their retirement. You can pay less income tax as the money you put in your RRSP account isn’t taxed as part of your income. An RRSP is different from a typical savings account as your investment aren’t taxed until you take your money out. You will be retired by the time you withdraw your money, so the taxable amount you pay would be less than in your earning years.

How does the policy work?

  • Depending on your risk tolerance and retirement goals, you must talk to an advisor.

  • Ensure the contributions suit your needs.

  • Your overall tax bill can be reduced with your annual contributions being deducted from your taxable income.

  • Tax-free investment growth.

  • Access to money any time, but withdrawals are taxable.

  • When you turn seventy-one or are ready to retire, your can convert your RRSP to an RRIF where you must withdraw the minimum annual amount. Additionally, you can purchase an income annuity.

What is your RRSP contribution limit?

The contribution limit is calculated by the Canada Revenue Agency (CRA) based on these three factors mentioned below:

  • Total of your unused deduction from the previous year.

  • Add the lesser amount of:18% of the earned income you reported on your tax return last year

  • $26,500 (the annual limit for 2019)

  • Then deduct any pension adjustment from the previous year, if applicable.

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If you go over your RRSP limit, what happens?

If you go overboard, you will be taxed 1% per month on any amount than $2,000 over your contribution limit. If you fail to pay the additional tax within 90 days, you will be charged a penalty.

Tax advantages of an RRSP:

A Registered Retirement Savings Plan provides tax advantages in the future and upfront.

  • Upfront advantages:In addition to making payments, you are reducing the income you will pay taxes on; at the same time, you’re saving money as well. For example, if you earn $80,000 annually and decide to contribute your allowed maximum into your Registered Retirement Savings Plan — $14,400 when it is time to pay your taxes, the CRA will only tax you on $65,600 of income.

  • Future advantages:Until you make a withdrawal, any growth on the investments in your Registered Retirement Savings Plan is sheltered from tax.When you are in your retirement, the tax bracket is low.

What are the Registered Retirement Savings Plan contribution rules?

There are two RRSP contribution rules:

  • You can contribute until Dec. 31 of the year you turn 71 years old

  • You can contribute what you have available in your contribution room provided by the CRA

What can you put in a Registered Retirement Savings Plan?

Canada Life offers these below-mentioned investment opportunities:

Before you retire, can you withdraw from your RRSP?

Money can be withdrawn from your RRSP at any time, but there are three essential considerations:

  • Set your saving goals back: If you do not set your savings goal, you will lose all the benefits of your earnings which can have a significant impact with time.

  • Pay tax now: An upfront withholding tax and the withdrawal amount are added to your taxable income in the year.

  • Lose your contribution room:If you take out any money, you will lose the contribution room permanently.

Times you may want to withdraw

The money earned from RRSPs can be used to pay for your child’s post-secondary education or fund your dream home etc.

What is the difference between a group RRSP and an individual RRSP?

A group RRSP is offered through your employer and is different from the one you might open on your own. They usually have lower management fees and allow your employees to contribute through payroll. That’s a positive because it means your RRSP contributions are deducted before tax, reducing the amount of income tax from your pay.

Do you need anRRSP or TFSA?

A TFSA and an RRSP do the same thing; both policies allow you to save money for the future, but in different ways. Depending on your needs, having both can help you achieve your specific goals.

How do you start one? Filed your income for the previous year and earned an income If you are a Canadian resident and you’re 18 or older having a valid social insurance number
How long can you contribute? Dec. 31 of the year you turn seventy-one For entire life
What’s the contribution deadline? March 1, 2021,is when you will claim a deduction for the previous year N/A as contributions are not deductible
What’s the contribution limit? The smaller amount of 18% of your earned income last year or 2020’s annual limit of $27,230 plus any unused carry-forward
contribution room, less any pension adjustments $6,000 for 2020, plus any withdrawals in a previous year and any unused contribution room carried forward from the previous year
What happens if you withdraw money? The contribution room is lost permanently The contribution room is re-added on Jan. 1 of the following year
What are the upfront tax advantages? Taxable income is low for the current year None, because contributions are made with after-tax income
What are the future tax advantages? Income earned in your RRSP is tax-free as long as it stays in the plan. Tax is not paid on any income earned in the account or the money you withdraw.
Every dollar withdrawn is taxed at asmall tax rate.Tax rate is lower when you’re retired. If you need to use your savings forshort-term expenses or emergencies there are no tax implications.
Withdrawals aren’t considered income, so this money isn’t included when the government calculates benefits like Old Age Security, Guaranteed Income Supplements, GST/HST credits and other credits/benefits like the Age Credit.
Conclusion RRSP provide greater short and long-term tax benefits. It is less flexible because you have to pay tax on withdrawals. Less tax benefits but is more flexible because there are no tax implications for withdrawals.


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