Registered Retirement Savings Plan
is a retirement plan that you establish, and to
or your spouse or common-law partner
contribute. The plan is
in the Canada Revenue Agency under the
Income Tax Act and regulated by the Federal Government.
the plan are tax-deductible unless they exceed
limit. Your 2016 RRSP deduction limit is shown on the latest
Notice of Assessment or Notice of Reassessment, which
was sent you after Canada Revenue Agency
processed your 2015 return.
The maximum RRSP
deduction limit for 2016 is $25,370. However, if you did not use all
of your RRSP deduction limit for the years 1991 to 2015, you could
carry forward the amount you did not use to 2016.
deduction limit for 2016
might be more than $25.370.
If you are a member of a Registered Pension Plan (RPP) or
Deferred Profit Sharing Plan
(DPSP), your annual RRSP deduction limit
is reduced by the pension adjustment, which depends on the amount
the employer contributes in the plan. And again,
the amount of RRSP contributions that you
can deduct for 2016 appeared on your Notice of Assessment or Notice
of Reassessment for 2015.
These contributions are invested in different investment
products. Contact us for information and free consultation regarding how
you can invest your money in RRSP.
Any income you earn
RRSP is usually exempt from tax for
the period the funds remain in the plan. It means you can earn more.
For example, you pay 30%
tax. If you invest your funds in some financial vehicle in
RRSP, which pays 5%
interest, the gross value of your investments in 10 years will
increase by 63% (the compound value). If you invest in the same
financial vehicle with the same interest rate out of
the effective interest rate in this case is 3,5% as you pay tax on
the interest every year. That is why your funds in 10 years will
increase by only 41%.
RRSP is an
account designed to benefit the owner at retirement. The investor
pays tax when he or she receives payments from the Plan. It is
supposed, while the
income is taxed in full, the investor may be subject to a lower tax
rate if he or she has retired and is receiving a lower taxable
holder may make withdrawals or de-register the
plan at any time (except lock-in RRSPs). But withdrawals from an
and de-registered amounts
are subject to a graduated withholding tax and such withdrawals must
be included in income in the year withdrawn. The withholding tax
paid by the RRSP holder should be taken into account when his/her
annual tax return is calculated, and more tax may be payable
at year-end, depending on the RRSP holder's income level.
There is no
limit to the number of
RRSPs an individual may own.
cannot be as collateral for loan purposes.
You can withdraw
RRSPs to buy or build a home for yourself or for someone who is
related to you and is disabled (Home
Buyer's Plan). And you
can withdraw from RRSPs to finance training or education for you or
your spouse or common-law partner (Lifelong Learning Plan).
You do not have to include eligible withdrawals in your income and
pay withhold tax, when you withdraw funds from your
RRSP in these
cases. However, you have to repay the amounts over definite period
You may want to set
up a spousal or common-law partner
(Spousal RRSP). By doing so, the taxpayer
can create an
RRSP in the spouse’s or common-law partner’s name,
even though that individual may have little or no earned income. The
benefit is greatest when a higher-income spouse or common-law partner
contributes to an
RRSP for a lower-income spouse or common-law
partner. The primary purpose is to create a fund that will later
(approximately in three years) produce taxable income for the spouse
or common-law partner rather than the contributor. The contributor
receives the short term benefit of the tax deduction for the
contributions, while his/her spouse, who is likely to be in a lower
tax bracket during retirement, receives the income and reports it on
his or her tax return.
Canada Revenue Agency allows an
over contribution to remain without
consequences as long as it does not exceed $2,000. Any amount in
excess of $2,000 is subject to a penalty tax of 1% per month until
that excess is withdrawn from the taxpayer’s
December 31 of the year you turn 71
is the last day you can contribute to
your RRSP. This year you have to choose one of the following options
for your RRSPs:
for RRSP advice, to open
RRSP account and start your retirement
have any questions or concerns feel free