The Benefits of RRSPs

The Tax-Savings Plan for Just About Everyone

Every Canadian who works, pays income taxes, and wants a secure retirement should have an RRSP.  Here's why:

  • Whether you earn income through self-employment or as an employee, you can reduce your annual tax bill AND save for the future.
  • Even people who have a company pension plan can supplement their retirement needs with an RRSP.  Those who don't have a pension plan will look to their RRSP as the financial foundation of their retirement.
  • Partners with one spouse earning more than the other can reduce their combined taxes through a spousal RRSP.  
  • If you are planning to buy your first home or want to continue your education, you can “borrow” a portion of the funds from your RRSP without a tax penalty.
  • And if you experience ups and downs in your income because of irregular work or a career change, the funds in your RRSP are always available to you by paying the taxes on amounts withdrawn.

How Much Can I Contribute?

Canadian taxpayers 71 years of age or younger can make annual contributions up to 18% of their earnings up to a limit set by the federal government.  Your personal RRSP contribution limit for the current year can be found on your previous year's Notice of Assessment, which the Canada Revenue Agency (CRA) sends out every year after you file your income tax return.  You an also call the CRA T.I.P.S. line (1-800-267-6999).  This service is available from mid-September through the end of April each year.  Callers must provide their Social Insurance Number, date of birth and total income from line 150 of the previous year's income tax return.

Are My Deposits Protected?

Funds held in deposits such as Term Investments and the Investment Savings Account within an RRSP are separately insured from the funds you hold outside a registered plan.  Credit unions in Ontario, like FirstOntario, offer unlimited deposit insurance¹ for all registered savings plans.

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1. Government-guaranteed deposit insurance is provided by the Deposit Insurance Corporation of Ontario.  It protects you up to $100,000 for unregistered investments and is unlimited on registered plans.

 

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