What Is a Registered Retirement Plan and Is It Good For You

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How Registered Retirement Savings

Plan Can be Useful for Building Savings?

If you want to build your savings then registered retirement savings plan can be quite helpful in accomplishing your goals. Let us find out more about registered retirement savings plan (RRSP) and how it can be beneficial for you.

An Insight into RRSP and Its Benefits

personal financial advisorHere we will look into several details related to registered retirement savings plan such as:

  • What are RRSPs?
  • How spousal RRSPs can be beneficial for you and your spouse?
  • What are the advantages of utilizing group RRSP?
  • What is referred to by locked-in RRSP?

Registered Retirement Savings Plan 

First thing you will have to do is contact your personal financial advisor to know more about RRSP and how it can be useful for you. So, let us delve into details of what RRSP is. Basically, it is one form of savings plan where earnings from investment as well as all your contributions build up on a tax deferred savings. It is also worth mentioning here that at the time of withdrawals, these will be taxed in the same way as other incomes are.

Usefulness of Spousal RRSP

As the name suggests, it is one type of RRSP in which contributions are allowed by a person to RRSP of his or her spouse. The main advantage of this from of registered retirement savings plan is that couple can utilize spousal RRSP for lowering taxes they have to pay. How this can be possible? Let us find out. Here spouse earning higher income makes contributions towards spousal RRSP and when both retire, spouse getting lower income starts withdrawing from the plan. This way if you have higher income then you can easily divert income earned after retirement towards your spouse and lower the amount of tax both of you will be liable to pay during your retired life.

Benefits of Group RRSPs

Such RRSPs are sponsored by employer and in this form of registered retirement savings plan participating employees get their individual accounts. You should discuss this type of RRSP with your personal financial advisor to fully understand all aspects related to it. However, the main positive point about group RRSPs is that you are allowed to contribute to this account directly from your payroll. Moreover, before tax funds are utilized for making the contributions, meaning you avail tax benefit right at the time without the need to wait for next year to receive the tax refunds.

Locked-in RRSP

Locked-in RRSP refers to a situation where funds available in a registered pension plan are transferred into registered retirement savings plan. Primary aspect about locked-in RRSP is that here you are debarred from taking withdrawals from this type of account and payments which are allowed are the ones related to retirement income payments. There are two things which can happen when you retire:

  • Conversion of funds available in RRSP into a form of life income fund or
  • Funds are used for purchase of annuity.

A Final Note

To from details it is quite clear that registered retirement savings plan is a very attractive investment plan and you should get more details about the same from your personal financial advisor.

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