The constant need for financial security in today’s world encourages us to be on the look-out for savings plans that could benefit us the most. A popular choice among investment-savvy Canadians is the Registered Retirement Savings Plan, otherwise known as an RRSP. Here are some important facts you need to know about this plan to help you out:
- Savings on tax–The contributions you make to your Registered Retirement Savings Plan is tax deductible. This means that this plan allows you to make a significant amount of savings on taxes. For example, if you make a contribution of $5000 from your taxable income of $60,000, you should be able to save approximately $1,500 depending on the province in which you’re residing.
- Varieties of plans –One of the best features of the RRSP is that you’re not just limited to contributing to your own account. You have options to set up an account wherein contributions are made by your employer and deducted from your paycheck. You can even go for the spousal RRSP, which lets a spouse with higher income make contributions to the account of the other spouse.
- Self-directed RRSP –You can opt to set up a self-directed RRSP that can bundle up a wide variety of plans together. Through this option, you get to make investments such as mutual funds, guaranteed investment certificates, stocks, gold and/or silver bullions, and many more.
- Starting early –Since RRSPs do not have a minimum age limit, it is recommended that you start early for higher returns. You can continue making contributions up to the age of 71 if you’re still earning then. After you’ve reached the age limit, you have the option to buy annuity, switch to a different kind of savings plan, or withdraw the amount in cash.
Whether or not you wish to start a Registered Retirement Savings Plan, make sure you do a thorough research about the plan. This can guide you in reaching a decision that will benefit you in the future.