What you should know ...

 

 

 

We can say that the RRSP, Registered Retirement Savings is a tax shelter in that it allows you to achieve a growth of your assets protected from tax.

Tax Savings

It is registered with the tax authorities and is therefore subject to special treatment vis-à-vis the tax when filing and withdrawal.

As additional incentive, our governments are giving you tax savings. You should know that in some cases, these savings could be reduced or postponed due to the minimum tax.

Among various strategies, you should use these tax returns to maximize your contributions.

Revenue from Government Pension

The combined maximum for all plans for one person is $ 1,986.52 per month, or $ 23.839 per year (2007).

Contribution Limits

The annual contribution limit is 18% of earned income up to a ceiling fixed annually, which is $ 22 000 for 2010.

For those who have multiple sources of income, earned income is defined in tax law and may include a variety of sources.

If you participate in a retirement plan for your business, your maximum allowed is reduced to reflect this advantage. It takes into account your payments and your employer's contribution. It should also take into account the importance of your retirement benefits.

The reduction is calculated from the pension adjustment (PA) that appears on your T-4 in Block 52.

Consult your accountant, banker, financial advisor and even the finance people from your employer. They can help you if you have a complex situation.

If you do not contribute the maximum

If you can't contribute the maximum and have not done in the past, your "credits" accumulates since 1991. Your notice of assessment of federal taxes for the previous year indicates your deduction limit.

You can also check the Automated Revenue Canada (Quebec call 1 800 463 6831.

In other words, you can contribute a significant amount if you have an opportunity: a capital gain, compensation for dismissal, etc.. Study the possibility of acting in this respect, the rewards can be significant. View I still hesitate . and RRSP Loan.

Deadline

The last day of February for contributing to the previous tax year.

Excess Contribution

If you are over 18, you can contribute $ 2 000 overpayment without penalty. This limit is cumulative and not annual. A penalty of 1% per month applies to the excess. Persons under 18 years are penalized for any excess. 

 

 

 

Spousal RRSP

It can be very interesting to contribute in the RRSP for your spouse. Remember that you must pay tax when you remove it for your retirement. As tax rates rise with income, then you may draw your income from two sources and reduce the tax burden. See Spousal RRSP.

Age Limit

The age limit for contributing to your RRSP and have an RRSP is 69 years (71 years at Federal). Therefore, if you celebrate your 69th anniversary this year, you must terminate your RRSP by December 31st. However, you can contribute to your spousal RRSPs. Your financial advisor can guide you in choosing different strategies after the RRSP.

Financial products available

All financial products available for investment is RRSP: certificate of deposits up to shares of companies including mutual funds.

Using RRSPs

As retirement income

The usual usage. There are several scenarios to get the best retirement income. If you need to make such choices soon and in addition, your RRSP is significant, do not hesitate to consult an experienced financial adviser who understands the challenges of retirement.

If you are still far from this situation, it would be interesting to know how to anticipate and see what you might want to do now. Again, your financial advisor can be of great assistance in this area.

As income

You can withdraw your RRSP at any time. You will suffer some consequences , but is allowed. This income could serve you during a sabbatical year or a long period without a job or income.

To purchase a residence

You expect to own a home and you save for this purpose. You could do three strokes with one stone by putting the money in an RRSP.

One, you contribute to your RRSP. Two, you can increase your "savings" with the tax return you receive. Three, your "down payment" for the home increases the tax-free. See RRSP Mortgage.

To pursue your studies

You can use funds from your RRSP to finance your studies, and without paying taxes.

You need to "repay" your RRSP over 10 years. See Students.


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