Registered Retirement Savings Plan (RRSP)

An RRSP is a retirement savings plan to which you or your spouse or partner contribute.

By: Admin

What is an RRSP?

An RRSP is a retirement savings plan to which you or your spouse or partner contribute. RRSP is registered by the government and tax can be decreased through deductible RRSP contributions. As long as the contributions remain in the plan, the income earned in the RRSP is exempt from tax. Tax has to be paid when you receive payments from the RRSP.

How Do I Set-up an RRSP?

RRSP plans can be registered through financial establishments such as banks, trusts, credit unions or insurance companies. RRSP contributions are based on “earned incomes”.

What are the Different RRSP Plans Available to Me?

There are multiple RRSP plans available, including:

  • Spousal or Common-Law Partner RRSP

This plan ensures that the retirement earnings are divided evenly between your partner/spouse and you. Benefits are maximised if a higher earning partner or spouse contributes to an RRSP for a low-income partner or spouse. The contributor collects the short-term benefit of the tax deductions for the contributions, while the beneficiary earns the income.

  • Self-Directed RRSP

Self-directed RRSP plans are ideal for those who choose to build and operate a personal investment portfolio by buying and selling various investments. The RRSP contributions are made directly to the plan issuer. Common qualified investments for a trust administered by an RRSP include money, mutual funds, corporate bonds, investment certificates, and securities listed on designated stock exchange.

How Do I Receive Income From an RRSP?

You can choose one of the following options for your RRSP at any age up to the end of the year you turn 71.

  • Transfer Your RRSP Funds to a Registered Retirement Income Fund (RRIF)

After you register an RRSP, you receive a minimum annual amount based on the value of the RRIF at your age. An RRIF is used to earn income from the amount accumulated in an RRSP.

  • Use Your RRSP Funds to Purchase an Annuity

Annuities offer an assured income for life for a particular period. You may have to pay tax once you start collecting payments.

  • Commutation Payments From an RRSP

A commutation payment is a fixed payment from your RRSP equal to the current value of all or part of future annuity plans. The commutation payment can be transferred to an RRSP or RRIF, or used to buy an annuity.

  • Other Income and Deductions from an RRSP
  • Your RRSP May be an Amended Plan
  • Withdraw Your RRSP Funds

When you withdraw an amount from your RRSP, your issuer may withhold some tax.

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