The Canadian Government provides a program to its citizens that allows them to save for retirement. It is called the Registered Retirement Savings Plan. From this point forward it will be referred to as RRSP. The topics covered by this article are advantages, eligibility requirements, and options a persons has in opening an account.
Do not think of the RRSP as an investment in itself. A more accurate description would be that it is an account which HOLDS investments. A person can buy an investment in an account which one then contributes into. It can be compared to brokerage accounts one can open at, for example, Canada’s Royal Bank.
The many advantages to an RRSP include registration by the Canadian federal government and being legally recognized as a trust, along with being able to hold many different types of investments. Another is tax benefits, and this is the main motivation to contribute.
Of the many benefits this plan provides, two stand out as major benefits. The first, tax deferred growth, involves the profits made by the account. These profits include interest, dividends, and capital gains.
Disabuse yourself of the idea that tax deferred means tax-free. The good news is that, unlike most other retirement plans, the RRSP does NOT tax immediately upon profits made into the account. It is a known fact that the income of retirees is less than the income a retiree previously made in peak working years. This simple fact is why tax deferred growth is considered a benefit.
Tax credit is the other major benefit of an RRSP. Essentially, as a person contributes more money into the plan, the income taxed by the government is reduced.
So, who is eligible to open a Registered Retirement Savings Plan? The following paragraphs will cover the requirements/criteria involved.
Although, there are criteria involved in opening an account, it is a fact that practically any working age Canadian is eligible. What follows is a list of said criteria.
Be working within Canada.
Be under 69 years of age.
Contribution room is available.
You file income tax with the government of Canada.
Once eligible, a person has a couple of options regarding the opening of an account. Firstly, one can visit any of Canada’s financial institutions (i. E. Bank, credit union, caisse populaire, etc.). Secondly, an eligible person can open an account by logging onto the websites of most brokerages or major Canadian banks if they prefer to not do so in person.
Canada’s Registered Retirement Savings Plan allows a citizen to take control of their retirement due to the many benefits provided. Most Canadians will fall into the range of eligibility and, once eligible, have many options in opening an account.
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