A Tax Saving Investment Plan for Your Retirement

The Government of Canada introduced a Canadian retirement savings plan in 1957, commonly known as Registered Retirement Savings Plan or RRSP. The plan offers tax-saving benefits to its citizens, to encourage them into investing for their life after retirement from an early age.
To have an RRSP account it is essential for one to either be employed or have a source of income. It is one of the key eligibility factors to own an RRSP. There are various types of RRSP plans you can choose from to invest depending on your requirement.
1. Individual RRSP – This option is for individual contributors who wish to save for their own retirement.
2. Spousal RRSP – This option is for an individual willing to save and contribute to their spouse's retirement. Contributing to a spousal RRSP gives you the tax benefits, however, the spouse remains the account holder and beneficiary.
3. Group RRSP – Many employers choose to set up a group RRSP plan for their employees. Contributions in such group accounts are made through payroll deductions, thus reducing their overall tax burden.

What are the Tax-Saving Benefits of Investing in an RRSP?

The contributions made to an RRSP helps in the reducing your annual taxable income bill.
The contributions made to an RRSP grows over time and interest earned remains tax-deferred until withdrawn.

Other Benefits of Investing in a Registered Retirement Savings Plan

An RRSP gives you complete control of your investment. You can decide on how much and how often you wish to contribute to your account, which can be changed as per your convenience. Also, you can choose to pause your contributions at any time.
The money invested in RRSP can be borrowed to pay for buying a home or to pay for the education of your spouse or your legal RRSP partner. This money needs to be invested back within the given time period.
In case your income falls short on decided monthly or annual contributions, the same can be covered in the corresponding months or years.

Contributions and Withdrawals from an RRSP

Contributions to an RRSP account:
  • An individual can choose how often they wish to contribute to their RRSP plan. They can choose to contribute weekly, bi-weekly or monthly as per their income and other investment plans.
  • There is a limit on the total annual contributions one can make in their RRSP, and this limit differs from year to year.
  • For instance, in 2021 an individual can contribute a total of 18% of their total annual income to a maximum of up to $27,830 in the year.
Withdrawals from an RRSP account:
  • Any withdrawals from an RRSP are taxable at any age. However, the tax bill shall remain high if the withdrawals happen at an early age.
  • You can borrow money from your RRSP at any time to buy a house or pay for your or your spouse’s education. However, there are certain borrowing limitations:
    • The borrowing limit in an RRSP for a home buying plan is $35,000.
    • The borrowing limit in an RRSP for a lifelong education plan is $10,000 annually to a maximum lifetime limit of $20,000.
  • Your RRSP matures after you turn 71. Post this, you need to stop your contributions and convert your RRFP to an RRIF (Registered Retirement Income Fund) or annuity. With this, you will start receiving your retirement income.
An RRSP gives you an option to invest the accumulated funds in your account. At MILIFE we not only provide you the perfect Registered Retirement Savings Plans Canada but also the best investment options to choose from. We are considered amongst the top investment advisors in Canada. Let’s get in touch and plan your retirement savings options wisely.

Contact a MILIFE broker to learn about RRSP today.