We all know that saving for retirement is a good idea, right? And if you've taken steps to start putting money aside, then you're definitely on the right track.
But what's the best way to save? With so many savings options available, it can be difficult to know which one to choose. An RRSP is a registered retirement savings plan. It is a great way to save for retirement, for two key reasons.
First, with an RRSP you often save money on taxes right away. And second, your money grows on a tax-deferred basis as long as it remains in the plan.
By the time you begin to withdraw your funds in retirement, you will likely be in a lower tax bracket than during your income earning years. So, funds withdrawn at that time may be taxed at a lower rate.
And by contributing to an RRSP throughout your working career, you reduce your taxable income when it's generally taxed at a higher rate.
And how does your money grow tax-deferred? Your RRSP can be invested in a variety of investment vehicles such as GICs or mutual funds - each type of investment would normally generate some form of income. Because you are in an RRSP, the income that is generated from your investments will be tax sheltered. This means you won't pay tax on your investment income until the funds are withdrawn.
And... most people use RRSP's for retirement, but did you know, you may borrow from your RRSP for your first home, or for training or education.
You can start your RRSP by setting up small amounts through a regular contribution plan. But, if you're in a position to increase your RRSP contributions, it's easy to figure out what your personal contribution limit is.
You can contact the CRA or check your most recent Notice of Assessment to see the maximum amount you may contribute to an RRSP.
But regardless of what your contribution limit is, what's important is that you do contribute, and that you do so on a regular basis, over time. To learn about the flexibility of an RRSP, call us today, or visit the links at the end of this video.
Mutual Funds are sold by Royal Mutual Funds Inc. There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Please read the prospectus before investing. Mutual fund securities are not guaranteed or covered by the Canada Deposit Insurance Corporation or by another government deposit insurer. For funds other than money market funds, unit values change frequently. For money market funds, there can be no assurances that a fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in a fund will be returned to you. Past performance may not be repeated.
Investment Advice is provided by Royal Mutual Funds Inc. Royal Mutual Funds Inc., RBC Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada, The Royal Trust Company and Phillips, Hager & North Investment Management Ltd. are separate corporate entities which are affiliated. Royal Mutual Funds Inc. is licensed as a financial services firm in the province of Quebec.