What Is Registered Retirement Savings Plan Of Canada?

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.

Before we get into what the program is, let’s be clear on what it is NOT. It is not, by itself, an investment. It is an account which HOLDS investments. It is very similar to a brokerage account one would open at Canada’s Royal Bank or TD Canada Trust, for example. A person cannot buy an RRSP. What is “bought” is an investment in a retirement plan account which one then contributes into.

Registered by the Canadian federal government, legally recognized as a trust, and able to hold many different types of investments, are a few of the advantages of having an RRSP. Although, a major motivation and benefit of the plan involves taxation.

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.

First of all, it needs to be mentioned that tax deferred is not equal to tax-free. Most other retirement plans not only tax a person when their investment is withdrawn, but also during the accrual of profits to the account. The RRSP sets itself apart in that, while it does tax upon withdrawal at the point of retirement, its does NOT tax immediate profits as earned income. This is considered a benefit due to the fact that most retirees’ income tend to be lower than income made in their peak earning years.

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.

Work in Canada.

You are under the age of 69

You have contribution room

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.

A citizen of Canada can take control of their future by utilizing the Registered Retirement Savings Plan provided by the Canadian government. You may already be eligible and can easily open an account using the aforementioned options.

Need to contribute to Registered Retirement Savings Plan Of Canada, then visit the Canadian investment guide for more great suggestions.