Canadians realize that without adequate financial planning they may not be in a position to secure in their retirement years. And most of us don’t plan or think that way, unfortunately.
At Smart Advice for Life, we help you regain that courage to think about your future and act accordingly. We provide mental stability through an advice that fits best in your current lifestyle.
How RRSPs works?
A Registered Retirement Savings Plan (RRSP) is an account, registered with the federal government that you use to save for retirement. RRSPs have special tax advantages, which are;
- Tax-deductible contributions – You get immediate tax relief by deducting your RRSP contributions from your income each year. Effectively, your contributions are made with pre-tax dollars.
- Tax-sheltered earnings – The money you make on your RRSP investments is not taxed as long as it stays in the plan.
- Tax deferral – You’ll pay tax on your RRSP savings when you withdraw them from the plan. That includes both your investment earnings and your contributions.
How much you can contribute?
Anyone who files an income tax return and has earned income can open and contribute to an RRSP. There are limits on how much you can contribute to an RRSP each year. You can contribute the lower of:
- 18% of your earned income in the previous year, or
- the maximum contribution amount for the current tax year: $23,820 for 2013.
If you are a member of a pension plan, your pension adjustment will reduce the amount you can contribute to your RRSP.
How long your RRSP can stay open?
You must close your RRSP in the year you turn 71. You can withdraw your RRSP savings in cash, convert your RRSP to a RRIF or buy an annuity.