If saving money over your lifetime on a tax-sheltered basis which allows your money to grow faster sounds appealing to you, you should consider investing in a Registered Retirement Savings Plan (RRSP). Below are a few reasons why an RRSP could be extremely beneficial to your financial situation:
1. Tax-Deductible Contributions
You are able to claim RSP contributions as a deduction on your yearly tax return. Alternatively, you can carry forward deduction from contribution to future years when your income may be higher.
2. Tax-Free Growth
As long as your money remains in the RSP, you won’t have to pay any taxes on its investment gains. This allows your retirement savings to grow considerably faster!
3. Generate Retirement Income for Stability
Once you are ready to retire, you can convert your RSP to a RRIF or annuity to receive regular payments. Although income from an RRIF will be taxable in your later ages, you may be in a lower tax bracket and pay less tax.
4. Spousal RSP Benefits
A spousal RSP can actually allow you to split income in the household. Retirement income can also be split more equally between you and your spouse, generating a reduced amount of tax that the higher income earner pays.
5. Government Withdrawal Benefits
An RSP allows you to make withdrawals without paying any tax if you pay the money back within the specified time periods for home buyers plans (withdrawing to contribute towards your first home purchase) or lifelong learning plans (withdrawing to contribute towards education costs).
So, who should invest in a RRSP?
If you are a Canadian under 71 years of age who earns employment income and wants to save for retirement by reducing your tax bill, you want to meet long-term retirement goals and generate ongoing income in your later years, and/or you are a medium to high income earner, a RRSP may be right for you.
Let us help you make the best financial choices based on your needs and unique situation. Contact our team at Quarry Wealth to learn more about RRSPs and find out if they could compliment your financial situation and goals.