Retirement Investing

Registered Retirement Savings: A Neat Way To Build Savings And Wealth

Registered retirement savings are offered by the Canadian government to support a consistent plan to accumulate savings for retirement. Registered retirement savings plans are setup through a registered financial institution such as a bank. In general, contributions to these plans reduce tax and are exempt from tax for the time the funds remain in the plan. You are, however, required to pay tax when you cash in, make withdrawals or receive payments from the plan. The full extent of your obligations will depend on your individual circumstance and structure.

There are some guidelines that need to be considered when establishing a registered retirement savings plan. For the most part, these plans consist of two registered common law partners. The benefit of this plan is maximized when the higher income earning partner contributes a larger portion of income and the payout is structured so that distribution occurs to the lower income earning person. This benefit is two fold. The larger income earner initially receives a greater tax break and the payout partner is exposed to a lower tax rate at distribution time. Therefore, structuring your RRSP plan to maximize the outcome is very important.

Self directed registered retirement savings plans provide the ability for individuals to manage their investments. The Canadian government issues guidelines as to what constitutes allowable contributions. Property, shares, bonds, cash, mutual fund sand annuities all comprise investment vehicles that can be structured under a registered retirement savings plan. The exact specifications are provided for under IT-320. You can access this from the Canadian Revenue Agency website or consult with your plan issuer or financial advisor.

The amount you can contribute to the registered retirement savings plan without incurring taxation penalties is determined by your RRSP deduction limit. This is generally shown on your latest notice of assessment or on a T1028 statement. You can setup an account on the Canadian Revenue Agency website to obtain a Canadian Government epass. This will allow you to access pertinent taxation and RRSP details.

If you are a resident of Canada then it is worthwhile to become more knowledgeable about registered retirement savings plan options. By structuring your affairs to minimize tax and maximize savings, these plans can be used as a core component of a retirement savings plan. Before you proceed it is best to investigate your options by reading the requirements on the Canadian Revenue Agency website and discussing you options with a suitably qualified financial planner.

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