5 Tips About RRSP’s Every Canadian Should Know About
Any income that you earn in a registered retirement savings plan (RRSP) is exempt from tax, as long as the funds stay in the plan. RRSPs help you save for your retirement and give you a break at tax time too.
Here are 5 Tips about RRSP's every Canadian should know which will help save a lot of money.
1. Start saving early
Saving early means that you contribute more and more to achieve your financial goal. If you start saving $100 every month till you are 65, then you will save around $197,000 for your retirement. But if you start saving later, then you would have to save a prodigious amount every month to meet your desired financial requirement at the age of 65. So, better start saving early so you can live a moderate life in the present and in the future.
2. Know how much you can contribute
In order to contribute to an RRSP, you need to show some earned income (such as income from employment, a pension, or a rental property). Your limit is 18% of your earned income for the preceding year up to an annual maximum ($26,230 in 2018). If you are not sure what your limit is then you can check your limit on your latest notice of assessment or notice of reassessment, by logging into Canada Revenue Agency (CRA) account online, or by calling Financial Director of Discovery Insurance- Phil Edney on (250) 592-4887, who is the answer of every RRSP Problems.
3. RRSP contribution = tax refund
Contributing to an RRSP will result in a tax refund. Here is a tip, rather than spending that refunded money on a vacation or a shopping spree, use it to recontribute that money into an RRSP or down your pending debt. But that refund shouldn’t be used for a trip or a shopping spree. Instead, you should re-contribute that money into an RRSP or pay down debt.
4. RRSP room carries forward
If you have $10,000 in RRSP contribution room but you only contribute $5,000, the remaining $5,000 in contribution room carries forward. So if you expect to have $10,000 in RRSP contribution room next year, you’ll be able to contribute up to $15,000 ($5,000 + $10,000) in 2019. Your unused contribution room carries forward until you turn age 71.
5. You can’t contribute to an RRSP forever
When you turn 71, you can no longer contribute to an RRSP. You must convert your RRSP into a registered retirement income fund (RRIF) and begin making withdrawals or use the funds to buy an annuity. You can also do both. There’s also the option to withdraw everything from your RRSP but you’ll have to pay a withholding tax of up to 30%. So, it is best to consult a Financial Advisor before enrolling in an RRSP to get a clear view of ‘How’ and ‘How Much’ to invest.
One thing is clear that if you are looking for a way to reduce your taxes and save for your future retirement than RRSP is the answer.
Phil Edney, Director of Financial Services in Discovery Insurance, can be your personal guide who will save you a lot of money through his veteran skills and knowledge.
RRSP is not actually an investment but a way of registering an investment to allow you to deduct it from your taxes.
The choices can be numerous and complicated. Allow Phil to analyze your personal situation to see what fits best for you. And because he’s located in Hillside Shopping Center, Victoria BC, parking is easy. Give Phil a call today. Visit: http://discoveryinsurance.net/rrsp.php