Registered Retirement
Savings Plan (RRSPs)
What is a RRSP
?
An RRSP (Registered Retirement Savings
Plan)
 is a personal savings plan registered with the
Canadian federal government allowing you to
save for the future on a tax sheltered basis.
Types of Investments in your RRSP:
o Guaranteed Investment
Certificates (GICs)
o Treasury Bills (T-Bills)
o Mutual Funds
o Stocks and Bonds
o Equities
o Canada Savings Bonds
o Mortgage-backed securities
o Income Trusts
An RRSP is special because…
Contributions are tax deductible

taxes from income are exempt
Tax sheltered
Portfolio can grow without
being taxed, unless funds
are withdrawn

Why Consider RRSPs??
RRSP’s can reduce your annual tax bill
Add comfort, for individuals who don’t
have a company pension plan

So all their retirement needs are met
Used as a source of financing

Ex. purchasing your first home or continuing education
Available to individuals who anticipate
fluctuations in their income

Ex. for maternity leave, career change, employment
interruptions
Every individual who works,
should consider an RRSP
…because of the long-term
benefits!
Benefits of RRSPs:
1.
Immediate tax benefits

2.
Sheltered from tax


3.
at a time when your income is generally highest
income earned on your RRSP is not taxed until it is
withdrawn
By the time you begin to withdraw the funds at retirement,
you will probably be in a lower tax bracket than your
earning years. Funds withdrawn at that time will benefit
from this lower tax rate
Reduces the amount you pay in income tax
Example of an Immediate Benefit….
Here is an example of an immediate tax benefit, if you invest
$5,000 into your RRSP in a year, and your
taxable income is $45,000. The tax rate is 26%.
$0 RRSP
Contribution
$5000 RRSP
Contribution
Taxable Income
$45,000
=$45,000-$5,000
=$40,000
Tax
$11,700
$10,400
Deferred Tax
$0
$1,300
Therefore, you save $1,300 in taxes.
Can you take out the money in your
RRSP before you retire?
Yes, you may.
• But, the funds withdrawn
from your RRSP will be
charged “withholding
taxes.” When you take
money out of your RRSP, it
becomes income and
therefore it is taxed.
• Government sends an
RRSP receipt with the
funds withdrawn for the
year, on taxable income.
Funds will not be taxed, unless the
following occurs....
Lifelong Learning Plan (LLP)

Can withdraw up to $10,000 tax free a year,
to help pay for yourself or spouse to
continue education.

Must repay at least 10% per year for up to
ten years

Generally, your repayments start 5 years
after your first withdrawal.
First Time Home Buyers' Plan (HBP)
•Ability to withdraw up to $25,000 from your
RRSP, to buy or build qualifying home for
yourself
•If purchasing house with a spouse, both can
take up to $25,000 in their accounts.
•Must be repaid within 15 years.
In the Event of Death…
Proceeds of the RRSP goes to beneficiary, or
to the estate if no beneficiary was designated
Beneficiary is identified on the RRSP, or the
RRSP holder’s will
Event of Death:
RRSP will remain tax-sheltered if…
 Surviving spouse is the
beneficiary

Proceeds are transferred to an RRSP
under his/her name
 No surviving spouse, but have
children or grandchildren,
named as the beneficiary
 Children or grandchildren,
regardless of age, are financially
dependent because of physical or
mental disability
Types of RRSPs:
1) A Basic RRSP





For individuals who want a simple
savings account, under their own
name
Available at the bank/financial
institutions
Offers a smaller range of investment
choices
Some advice from staff
May/may not have to pay investment
costs, commission fees
Types of RRSPs:
2) A self-directed RRSP
For individuals who feel they
know enough to choose their own
investments
Available at brokerage firms
Offers wider range of investment
choices, without advice
Have to pay cost for plans and
investment costs
Types of RRSPs:
3) A group RRSP at work
Available at workplace
Each individual has their own RRSP, but it is managed by
the same insurance, bank or mutual co.
Offers a wide range of investment choices
Funds deposited directly after pay cheques

Employer can add money to group RRSP
Employer pays cost of plan, you must pay investment costs
Types of RRSPs:
4) A Spousal RRSP
Available for qualified
individuals:



who are married,
lived together for more than
12 months,
have a child together by
birth/adoption
Contribute their money
into spouse’s RRSP

Balancing their income,
and reduces tax at
retirement
Who may NOT contribute into an RRSP?
Individuals in a lower tax bracket

Such as children and young workers
Is the money
in your RRSP Safe?
No, just because money is held in
your RRSP, investors should not
assume their funds are safe.
Why are they not necessarily safe?
Ability to lose money
depending on type
of investments
chosen


Example: Stocks.
Value of RRSP portfolio
can fluctuate day to day
Carry Forward
When an RRSP investor can not make the
maximum contribution one year, so it is brought
forward to the next couple of years

An individual may choose to delay claiming their current
year's RRSP tax deduction. To take the deduction in a later
year, you must make sure that your allowable deduction limit
has not been reached.
COSTS $$$
to set up an RRSP...
Will vary depending on
types on investments:
A fee to open your RRSP account
A fee to manage/hold your RRSP
account
A fee to manage the mutual funds
in your plan
A fee to set up a self-directed
RRSP
A fee when you buy/sell stock in a
self-directed RRSP
More Information on RRSPs....
You can contribute to your RRSP
until December 31st on the year
you turn 71.
When you reach 71, you can then:
 cash in your RRSP


transfer the investments in your
RRSP to a Registered
Retirement
Income Fund, or Registered
Annuity, from which you must
begin drawing retirement
income.
Remember,
it is beneficial to invest in
RRSPs, as soon as possible.
It lets you save for your future, while helping you
save tax money.