Saving for the future can be tricky and if you are like me, RRSP questions fill my mind. I don’t know about you, but thinking 20, 30 or more years into the future is not an easy task for me. One of the best ways to save up for retirement is by putting money into an RRSP. But what is an RRSP and how do you contribute? Is there a limit? Is my money tied up forever?
YOUR TOP 10 RRSP QUESTIONS ANSWERED
#1) WHAT IS AN RRSP? An RRSP (Registered Retirement Savings Plan) is an investment plan that lets you put money away for when you retire and are no longer receiving regular paycheque.
#2) HOW DO RRSPs WORK? The main idea behind an RRSP is for the money to stay in the account until you turn 71. Once you are ready to receive the money in the RRSP, you can pull it out in a lump sum or receive payments like you would a regular paycheque.
#3) HOW DO I GET STARTED? Setting up an RRSP is as easy as walking into your bank, credit union or lending location and asking to set one up.
#4) ARE THERE OTHER WAYS TO INVEST IN AN RRSP? Check with your employer. Some Canadian companies offer RRSP programs that allow you to contribute to an RRSP as part of your weekly paycheque. Some companies also match donations made!
#5) WHEN CAN I CONTRIBUTE TO MY RRSP? You can contribute to your RRSP throughout the entire year up until the deadline which usually falls the last day of February or the first day of March. Since most people procrasitnate until the last possible moment, it might be good to figure out a plan to contirbute all year through so that you don’t miss the deadline.
#6) CAN I TAKE MONEY OUT OF MY RRSP BEFORE I RETIRE? The quick answer is yes. As long as your funds are not placed in a locked-in investment. However, funds removed from an RRSP will be taxed upon removal.
#7) WHAT IS MY RRSP CONTRIBUTION LIMIT? Your last year’s income tax notice of assessment will let you know how much you can contribute to an RRSP.
#8) WHAT IF I CAN’T CONTRIBUTE MONEY THIS YEAR? If you don’t have extra money this year to contribute, you can carry over 100% of your total into the next year.
#9) ARE THERE ANY TAX BENEFITS TO AN RRSP? All money you donate into an RRSP, gets deducted from your taxable income. Depending on the province you live in, if you make $70,000 and invest $5,000, you save approximately $1,500!
#10) WHAT’S THE DIFFERENCE BETWEEN RRSP GICs and TFSAs? Check out this post from Ratesupermarket.ca which lays out the differences and gives you tips on when to contribute and how.
Are YOU ready for retirement? Check out this video that includes some one-on-one interviews with Canadians who give their thoughts on RRSPs and retirement planning.
If you want more great information or have more RRSP questions, sign up for Ratesupermarket’s RRSP Boot Camp to receive some answers!
You can sign-up to get an email update each day. You can also connect with us on:
This post was brought to you by Ratesupermarket.ca