All You Need to Know About RRSP’s.
Have you ever stopped to think about how you will care for yourself financially after you retire? Think about opening up a Registered Retirement Savings Plan (RRSP). You may be thinking to yourself, what is an RRSP? I’m going to make it simple to understand, so hang on tight!
Did you know that the average Canadian wants to retire by the age of 63? A recent study has found that 60% will not be able to do so with their current financial plan. Don’t think it is just a baby boomer issue, in fact, millennials are facing the highest real estate and family expenses in history. They simply aren’t banking enough either.
Registered Retirement Savings Plan (RRSP)
To put it simply, it’s a savings and investment plan, in which you set aside the funds you will need after you have retired. This type of plan works wonderfully whenever you are retired and have no regular income coming in. Anyone who files taxes can open up an RRSP.
Benefits of an RRSP
I love the idea behind the RRSP because it’s a super easy way to save money without it impacting your financial situation now. Any funds that you place in your RRSP, stays in your account until you are 71. After that, you can receive the funds as a lump sum or you can have the money taken out in increments. I think it’s also great that the money you put into your RRSP is not taxed until you decide to take it out. If you withdraw the funds early, the funds will act as part of your income that year and they will be taxed.
Amount of Funds
When it comes to an RRSP, you can contribute based on what you earn. Some people put as much as 18% of their income from the previous year. You can find your RRSP deduction limit here. Each time you make a contribution, you get a receipt, which you can use to claim a deduction on your income tax return. There are also several types of plans you can choose from. Keep in mind that each one works differently, so ask plenty of questions to decide which one is right for you. Here are the four basic RRSPs to choose from:
- A basic RRSP
- A group RRSP offered through your work
- A partner or spousal RRSP
- A self-directed RRSP
Contribution to your RRSP can happen any time during the year, just make sure to ask about the deadline. Some people have been known to make their contribution all at once, so it’s flexible!
Check out this Video!
I love this video of Penelope, of RateSupermarket having some very interesting conversations with Canadians about their retirement. She took to the streets to find out how the average Canadian feels about their retirement chances. A lot of them felt that retirement was a long way ahead of them and most of them were trying to get long-term and careers before even thinking about retiring.
They found that it was a challenge to think about retirement on top of having to pay bills and living costs. Many were not aware what options are available for them. In fact, many of them didn’t know much about RRSP programs.
Sign Up to Learn More!
If the Registered Retirement Savings Plan (RRSP) has you curious, you can sign up to learn more information. I am so excited about this next part: When you do sign up, you are automatically entered to win $2,016! All you have to do is sign-up for their RRSP Bootcamp. Once you’ve entered your info, you will receive 4 emails over the course of 10 days to help educate them on RRSP’s/GIC’s.
Times have changed from previous generations and job security is tough in this economy. Older generations would work for the same company for 35 years or more and that just doesn’t happen anymore. The more educated you are the better! It’s great to be financially literate!
Are you thinking about or already saving for retirement?
Let me know, til then–cheers m’deres!
Nancy Polanco is a freelance journalist and editor of lifestyle blog Whispered Inspirations. A social media junkie, a travel-lover with insatiable wanderlust and an aficionado for fun gadgets, good eats, and entertainment. You can find her on Instagram and everywhere else under @WhispersInspire.