RRSP

Great benefits of opening an RRSP

A Registered Retirement Savings Plan (abbreviated to an RRSP) is a savings account which offers you a simple way to put money away for your retirement. A key feature of an RRSP is the fact that it is registered with the federal government. Here, we will explore five notable reasons to save for your retirement in this way.

  • Your investment is tax free
    This is a great feature of an RRSP. Providing that you keep your investment earnings in the plan, you won’t pay any tax on them. This, of course, means that your savings have the potential to grow at a faster rate.
  • Your contributions are tax deductible
    You are able to show the contribution that you make towards your RRSP as a deduction on your annual tax return, which can add up to considerable savings for those in the top tax bracket. What’s more, you can carry forward this allowance to future years, if your income in one year is lower than usual.
  • You can save even more tax by taking out a spousal RRSP
    Another great tax benefit of these plans is the fact that you can combine your tax-free savings within a spousal RRSP and then more equally split your retirement income between you, again leading to potential further tax savings.
  • You can transfer your RRSP when you retire
    This means that you can easily move the funds invested in your RRSP to an annuity or a RRIF at the time of your retirement to receive regular, staggered payments – though you should note that you will have to pay tax on these payments on a yearly basis.
  • You can withdraw from your RRSP under certain conditions
    You won’t pay tax on withdrawals from your RRSP in particular circumstances. For instance, you are permitted to withdraw up to $25,000 for a down payment on your first home, or up to $20,000 to pay for education costs (funding rules apply).

Latest News

2024 Federal Budget Highlights

On April 16, 2024, Canada's Deputy Prime Minister and Finance Minister, Chrystia Freeland, presented the federal budget. While there are no changes to federal personal or corporate tax rates, the budget introduces: • An increase in the portion of capital gains subject to tax, rising from 50% to 66.67%, starting June 25, 2024. However, individual gains up to $250,000 annually will retain the 50% rate. • The lifetime exemption limit for capital gains has been raised to $1.25 million. Additionally, a new one-third inclusion rate is set for up to $2 million in capital gains for entrepreneurs. • The budget confirms the alternative minimum tax changes planned for January 1, 2024 but lessens their impact on charitable contributions. • This year's budget emphasizes making housing more affordable. It provides incentives for building rental properties specifically designed for long-term tenants. • Introduces new support measures to aid people buying their first homes. • Costs for specific patents and tech equipment and software can now be written off immediately. • Canada carbon rebate for small business

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TFSA vs RRSP – 2024

When looking to save money in a tax-efficient manner, Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP) can offer significant tax benefits. The main difference between the two is that TFSAs are ideal for short-term goals, such as saving for a down payment on a house or a vacation, as its growth is entirely tax-free, while RRSPs are more suitable for long-term goals such as retirement. When comparing deposit differences, TFSAs have a limit of $7,000 for the current year, while RRSPs have a limit of 18% of your pre-tax income from the previous year, with a maximum limit of $31,560. In terms of withdrawals, TFSAs have no conversion requirements and withdrawals are tax-free, while RRSPs must be converted to a Registered Retirement Income Fund (RRIF) at age 71 and withdrawals are taxed as income.

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