RRSP - Registered Retirement Savings Plan
A Registered Retirement Savings Plan is an investment account designed for saving toward your retirement years. As a Canadian government regulated program, RRSPs have special tax benefits. Your annual RRSP contribution may greatly reduce the amount of income tax you pay in that year and the money you put away can have years of tax-deferred growth potential. With an RRSP, tax is paid only on the amount of funds withdrawn.
Benefits of an RRSP:
- reduces your income tax payable for a given year
- provides income for your retirement
- provides income during times when less is earned (i.e. maternity, unemployment)
- can be used to purchase your first home or to pursue your education
Who can invest in an RRSP and when?
- All taxpayers with earned or eligible income can invest in RRSPs up to the end of the year in which they reach age 71.
- Contributions to the RRSP can be made at any time during the year for which you wish to claim the deduction, and within the first 60 days of the following year.
- It is worth noting that it is to your benefit to make regular deposits to your RRSP during the year rather than wait until the deadline, since money deposited will be earning interest sooner, and, for a longer period of time.
- Generally, the amount you can contribute to your RRSPs or your spouse or common-law partner's RRSPs, for a given tax year without tax implications is determined by your RRSP deduction limit. This is often called your "contribution room." Amounts that you contribute above this limit may be considered excess contributions (over-contributions).
- The government determines the current and future dollar amounts of the maximum that can be contributed to your RRSP each year.
- Contribution limits are shown on the latest Notice of Assessment that you receive after your tax return is processed for the previous year.
- If you choose not to make your maximum allowable contribution in a given year, it will be automatically forwarded to the next year.
What is a "PA"?The pension adjustment (PA) amount is the value of the benefits you earned each year under your employer's registered pension plans (RPP) and deferred profit sharing plans (DPSP), and possibly, some unregistered retirement plans or arrangements.
Generally, the PA reduces your RRSP deduction limit for the following year.
You can find your RRSP deduction limit and more by logging in to 'My Account' or by going to 'MyCRA' on your mobile device.
If you have questions about how your PA was calculated, contact your employer or RPP administrator.
What is an earned income?Earned income includes salary, wages, alimony received, and rental income. Earned income does not include investment income.
Can I take out money from my RRSP?
Yes you can, however remember that according to CRA rules & regulations, all RRSP withdrawals are taxable.
|withdrawal from RRSP||Tax percentage|
|Up to $5,000||10%|
|$5,000 to $15,000||20%|
|More than $15,000||30%|
Unlimited Deposit Insurance Coverage!
The combined money you have in eligible RRSP plans or contracts is automatically covered in FULL by the Deposit Insurance of Ontario (DICO), with no maximum limit. Deposit Insurance is backed by provincial legislation and is part of a comprehensive protection program in all Ontario credit unions.*
(* The Deposit Insurance of Ontario (DICO) does NOT INSURE any of the following: Member shares and investment shares issued by the credit union; Mutual Funds; Stocks, bonds and debentures; Treasury Bills; Foreign Currency deposits; Contents of Safety deposit boxes; Securities held for safekeeping.)
Further information on DICO deposit insurance coverage can be obtained by contacting: Internet site: www.dico.com; Toll free number: 1-800-268-6653; Tel. 416 325 9444; Fax: 416.325.9439
What investment options are available in our Credit Union?
Our Credit Union offers:
- Variable Rate Tiered Savings where the interest rate fluctuates with the market.
- Fixed Rate Non-Redeemable Terms, for terms of 1 to 5 years with a guaranteed rate of return, compounded annually.
- Index-Linked Term Deposits - 3 or 5 year terms
- Mutual Funds' Investments are available to all members of our Credit Union through Credential Asset Management. For more information, please contact our Mutual Fund Department.
- Plan registered in your spouse's name and to which you are contributing. As the contributor, you qualify for a tax deduction, but the RRSP investment belongs to your spouse.
- Advantageous if your spouse's retirement income is expected to be lower than yours.
- The total amount contributed to your RRSP and to your spouse's RRSP should not exceed the total deduction to which you are allowed.
- If your spouse withdraws from his or her RRSP in the first 3 years following the deposit, the amount withdrawn will be added to your taxable income of that same year. After that 3-year period, your spouse will be taxed on any amount withdrawn from his or her RRSP.
Separation or Divorce
In the event of separation or divorce, RRSP funds can be transferred from one party to the other party without the payment of tax providing that:
- There is a written separation agreement or a court order, or,
- The affected parties are living apart when property and asset matters are settled.
Death of the Plan HolderIn the event of death, RRSP proceeds can be distributed to a beneficiary you name or to your estate. The manner of distribution can be specified on the RRSP form or in your will.
Can I transfer money in from another financial institution or workplace?Transferring your RRSP or Pension from another financial institution or workplace is easy! We can even help you set up a regular deposit program to allow you to make regular contributions throughout the year. All you have to do is to visit your nearest Credit Union branch and bring your RRSP statement from another institution, or, a pension package from an employer. Our Credit Union staff will gladly take care of the rest.
Pay Yourself FirstIt is to your benefit to make regular deposits to your RRSP during the year, rather than wait until the deadline, since your money will be earning interest sooner and for a longer period of time. Save regularly and don't wait until the final deadline to make your contribution. Give your money an extra year to earn tax-sheltered interest, and pay yourself first!
Home Buyers' PlanThe RRSP Home Buyers' Plan allows you to borrow a maximum of $25,000 from your RRSP to buy your first home. You don't have to pay tax on the money you withdraw to use as part (or all) of your down payment, nor do you have to pay interest on the money while it is outside your plan. The key requirement is that you repay what you have taken out of your RRSP to buy a home at a minimum amount each year represented by one-fifteenth of the amount originally borrowed.
The Lifelong Learning Plan (LLP)
The LLP allows you to withdraw up to $20,000 from your RRSP to pay for your own or your spouse's education.
If you have any questions, you can visit CRA website: www.cra.gc.ca