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RRSP -Registered Retirement Savings Plan

A registered retirement savings plan (RRSP) is a personal savings account, registered with the federal government, for your retirement on a tax-sheltered basis meaning that any income generated from the various types of investment in that account is tax-deferred until you take the money out from that account which then will be taxed per withholding tax rate. The contributions to an RRSP account are tax-deductible which means you have more income available for your needs while you are saving for your retirement.
Any person, over age 18 who has paid income tax return in Canada will be eligible to contribute (per his/her contribution limit) to an RRSP until December 31 of the year he/she turns 71. One can contribute either 18% of his/her earned income in the previous year or the maximum contribution amount of 27,230 (for tax year 2020) whichever is lower.

Types of RRSPs:

Individual RRSP: This type of RRSP is registered under your own name and you are the only one contributing to it. If, after leaving your employer, you decide to transfer your registered company pension into your individual RRSP, that RRSP will be locked-in. This means that you cannot usually withdraw money from it until you retire.
Spousal RRSP: this is an RRSP registered in the name of your spouse, to which you contribute. Either you contribute to your own RRSP or to your spouse’s Spousal RRSP, These contributes will be counted against your own contribution limit. Your spouse contribution limits are not affected.
Lock-in RRSP: If you leave your employer before you retire, you have the option to manage your vested pension funds by having a locked-in RRSP. Investments held in this type of RRSP are locked in and usually, cannot be withdrawn before retirement.
Group RRSP: This type is offered by some employers. This is simply a collection of individual RRSPs for employees. Your contributions are taken from your pay through payroll deductions which will ultimately reduce your tax.

Some of the major benefits of an RRSP savings account are:

Contributions to RRSP savings account are tax-deductible which allows you to pay less tax annually on your income. If you can not make your maximum contribution one year, you can carry those unpaid portions forward and have more room in later years to contribute. There will be a penalty for over contributing to your RRSP account.
No tax will be paid on investment earnings in RRSP if the they stay in your RRSP and this will allow your investment to grow faster.
You can borrow, up to $25000, from your RRSP, tax free, under the Home Buyer’s Plan (HBP), for a down payment for your first home.
Under Lifelong Learning Plan (LLP), You can take out, up to $20,000, to pay education costs for you or your spouse without paying any tax on it.
When you retire, you can transfer your RRSP savings, totally tax free, into an Income Fund account (RRIF) or an annuity and you start receiving regular payment on a monthly basis. On these payments, tax will be paid per your tax bracket you fall into.
RRSP can hold a variety of investments including GICs, Mutual Funds (only RRSP-eligible ones), Bonds, T-Bills, ETFs, Saving bonds, Cash.
You can freely transfer your RRSPs between financial institutions at any time, tax-free. Also you can move some or all your money between investments within your RRSP.

Due to the great variety of conditions and facilities in preparing and using any kinds of insurance, it is recommended that you consult with one of our insurance advisors before making any decision. Our expert team at Forever Insure is always ready to provide the right consultation to you and thus help you make the right choice.

For more information, please contact one of our advisors at Forever Insure for a free consultation.
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