RRSPs

Cruises, traveling around the world, charity work, time, time and more time: once you’ve retired, you’ll probably have a lot of it on your hands. But what about money? Do you think you’ll have enough to able to carry out all of your plans? Here’s the solution: RRSPs.

A Registered Retirement Savings Plan is basically a personal retirement savings account that you open at a financial institution or group and contribute a determined amount of money to, on a regular basis. Contributions to an RRSP can be deducted from an individual’s taxable revenue, regardless of his or her age, as long as this person has earned wages that are at his or her disposition. 

An RRSP is the most effective way to plan a smooth retirement that is free of financial hassle. Why? Contributing to an RRSP allows you to postpone paying taxes on the portion of your salary that you are putting aside until you retire. You can contribute to an RRSP until you turn 69 years of age. After that, if your spouse is younger than you are, it is possible to contribute to his RRSP until he reaches the maximum age limit, too.

The variety of products offered in financial institutions and groups is in a constant state of evolution. It is now possible to diversify your RRSP contributions according to your needs and financial means. The kind of lifestyle that you are presently leading can give you a good idea of the amount you will need during your retirement. Usually, the proportion is between 60% and 80% of your actual revenue. For example, according to statistics, if you are presently making $40,000 per year, you will need approximately between $24,000 and $32,000 once you retire. Where does the money come from? Your retirement funds can come from different sources, such as your employer’s retirement plan, government pension plans, as well as your personal savings. These amounts may not be sufficient, which is where your RRSP comes into play. There are many options available, including RRSP placements and RRSP loans.

To establish an efficient savings and placement strategy, you need to evaluate your current financial situation, realistically: what are your current expenses and how much revenue do you dispose of? About what proportion of your current revenue can you afford to put aside? How much do you need to save up to be able to live comfortably during your retirement?

The earlier you start, the more time you’ll have to save up and reach your goal amount.

A few dollars put aside every pay check can make a considerable difference. But beware: this requires planning, not to mention discipline. To find out the maximum contribution that you are allowed to make to your RRSP every year, take a look at the notice sent out by the Canada Revenue Agency, or visit their website at www.cra-arc.gc.ca. You can also phone them at 1-800-267-6999.