Home
Offerings
FAQ & Information
Heritage Properties
Simple Interests
RSP
About Us
Contact Us
RSP
The Registered Retirement Savings Plan is a governmental program designed to help Canadian tax payers save for retirement. The major benefits of this program are two-fold – annual contributions are deducted from the individuals gross income lowering the amount of taxable income for that year; also, your savings grow tax-free inside the plan until you make a withdrawal. During retirement, withdrawals are taxed fully at your marginal tax rate (this is the amount of tax you must pay on your last dollar earned). Early withdrawals are subject to withholding penalties, as shown here:
10% on amounts less than $5000
20% on amounts between $5000 to $15,000
30% on amounts over $15,000
Withdrawals from an RSP are treated as earned income for the tax year of the withdrawal and could possibly raise your Marginal Tax Rate. Therefore, when you file your next tax return, such a withdrawal may in fact get taxed beyond the immediate withholding levels.
It becomes clear – saving inside an RSP has benefits and its difficulties. So while it remains an excellent vehicle to control your annual tax issues and will be useful when you retire (remember, your marginal tax rate should be lower once you’ve stopped working), saving for a major purchase or to finance a shorter term goal should be done outside this program. Please look at the Canada Revenue Agency’s website for more information regarding the two exceptions to the early withdrawal penalties – for purchasing a home and going back to school. Any monies taken for these purposes must follow the proper procedures, and must be repaid. Again, see CRA’s webpage.
Important Dates:
March 1, 2008 is the deadline for contributing to an RRSP for the 2007 tax year
December 31 – of the year you turn 71 (proposed legislation). This is the final opportunity you have to contribute to an RSP
Options at age 71 – you can withdraw all of your funds (generally not recommended due to the large tax hit such an option presents) and purchase an annuity (there are a variety of these), you can also convert your RSP to a RIF (Registered Income Fund).
Further, there are maximums to which one may contribute in any year to an RSP.
- 2007 $19,000
- 2008 $20,000
- 2009 $21,000
- 2010 $22,000
Any unused contribution room is carried forward from year to year. Your personal contribution limit will be mailed to you in your ‘notice of assessment’ (or ‘notice of reassessment’).
Remember, you can transfer the entirety of your RSP from one institution to another – this does not constitute a redemption in the eyes of CRA (you are not receiving any income).
The Registered Retirement Savings Plan is a governmental program designed to help Canadian tax payers save for retirement. The major benefits of this program are two-fold – annual contributions are deducted from the individuals gross income lowering the amount of taxable income for that year; also, your savings grow tax-free inside the plan until you make a withdrawal. During retirement, withdrawals are taxed fully at your marginal tax rate (this is the amount of tax you must pay on your last dollar earned). Early withdrawals are subject to withholding penalties, as shown here:
10% on amounts less than $5000
20% on amounts between $5000 to $15,000
30% on amounts over $15,000
Withdrawals from an RSP are treated as earned income for the tax year of the withdrawal and could possibly raise your Marginal Tax Rate. Therefore, when you file your next tax return, such a withdrawal may in fact get taxed beyond the immediate withholding levels.
It becomes clear – saving inside an RSP has benefits and its difficulties. So while it remains an excellent vehicle to control your annual tax issues and will be useful when you retire (remember, your marginal tax rate should be lower once you’ve stopped working), saving for a major purchase or to finance a shorter term goal should be done outside this program. Please look at the Canada Revenue Agency’s website for more information regarding the two exceptions to the early withdrawal penalties – for purchasing a home and going back to school. Any monies taken for these purposes must follow the proper procedures, and must be repaid. Again, see CRA’s webpage.
Important Dates:
March 1, 2008 is the deadline for contributing to an RRSP for the 2007 tax year
December 31 – of the year you turn 71 (proposed legislation). This is the final opportunity you have to contribute to an RSP
Options at age 71 – you can withdraw all of your funds (generally not recommended due to the large tax hit such an option presents) and purchase an annuity (there are a variety of these), you can also convert your RSP to a RIF (Registered Income Fund).
Further, there are maximums to which one may contribute in any year to an RSP.
- 2007 $19,000
- 2008 $20,000
- 2009 $21,000
- 2010 $22,000
Any unused contribution room is carried forward from year to year. Your personal contribution limit will be mailed to you in your ‘notice of assessment’ (or ‘notice of reassessment’).
Remember, you can transfer the entirety of your RSP from one institution to another – this does not constitute a redemption in the eyes of CRA (you are not receiving any income).
