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WHAT IS IT ARegistered Retirement Savings Plan (RRSP) is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Aay income you cara in the RRSP is ually exempt thom tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments fiom the plan

WHAT IS IT ARegistered Retirement Savings Plan (RRSP) is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Aay income you cara in the RRSP is ually exempt thom tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments fiom the plan

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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WHAT IS IT ARegistered Retirement Savings Plan (RRSP) is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Any income you cara in the RRSP is usually exempt trom tax as long as the funds remain in the plan; you generally have to pay tax when you reccive payments flom the plan. HOW DOES IT WORK Pre-tax money is placed by the investor into the RRSP account where the funds grow tax-free until they are withdrawn. At the time of withdrawal, they will be taxed at a marginal rate. It allows investors to compound without being taxed, as long as the funds are not withdrawn. How do RRSP HOW DOES IT WORK? work? SETTING UP AN RRSP You set up a registered retirement savings plan through a financial instirution such as a bank, credit union, or insurance company • Your financial institution will advise you on the types of RRSP and the investments they can contain • You may want to set up a spousal or common-law partner RRSP. This type of plan can help ensure that retirement income is more evenly split between both of you. • The benefit is greatest if a higher-income spouse or common-law partner contributes o an RRSP for a lower-income spouse or common-law partner. • The contributor receives the short term benefit of the tax deduction for the SETTING-UP contributions • You may want to set up a self-directed RR you prefer to build and manage your own investment portfolio by buying and selling a variety of different types of investments. If you are considering this type of RRSP, be sure to consult with your financial instinution HOW DO YOU GET TAXED huppo slp pa as ng isom noi I ta. The mount you pay depends on the amount you withdraw and where you live • Taking S5,000 meam the withholding tax ralea l0 • Wahdawing betwoen $5,000 and S15,000 mcam the withhelding rate in 20. TAX • Removing mne thun SI5,000 meam the withholding tax rate risa to 30 Nate Thee ta ntepply evarywhee in Canada cacept Quchec In Qubec, the falaral rates are lowe, but provincial t ate apply in addition to the federal withdrawal ate But the tuses don end there. Your tasable income will include the RRSP withdrawal for the ycar So if your marginal ta rate is higher tan the withholding ta rate you l pay extra on your withdrawal. TRX TYPES OF RRSP'S INDIVIDUAL RRSP: Retirement plan registered in the name of the contributor (Account holder) Individual SPOUSAL RRSP: A plan registered in your spouse's name and to which you are contributing The person who is contributing qualifies for tax deductions. SPOUSAL GROUP RRSP: Regular deposit savings plan that allows employees of a company to build capital for retirement through regular salary deductions GROUP SELF-DIRECTED: Atype of RRSP that can hold several different investment types (stocks, bonds) under one roof. SELF-DIRECTED
Transcribed Image Text:WHAT IS IT ARegistered Retirement Savings Plan (RRSP) is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Any income you cara in the RRSP is usually exempt trom tax as long as the funds remain in the plan; you generally have to pay tax when you reccive payments flom the plan. HOW DOES IT WORK Pre-tax money is placed by the investor into the RRSP account where the funds grow tax-free until they are withdrawn. At the time of withdrawal, they will be taxed at a marginal rate. It allows investors to compound without being taxed, as long as the funds are not withdrawn. How do RRSP HOW DOES IT WORK? work? SETTING UP AN RRSP You set up a registered retirement savings plan through a financial instirution such as a bank, credit union, or insurance company • Your financial institution will advise you on the types of RRSP and the investments they can contain • You may want to set up a spousal or common-law partner RRSP. This type of plan can help ensure that retirement income is more evenly split between both of you. • The benefit is greatest if a higher-income spouse or common-law partner contributes o an RRSP for a lower-income spouse or common-law partner. • The contributor receives the short term benefit of the tax deduction for the SETTING-UP contributions • You may want to set up a self-directed RR you prefer to build and manage your own investment portfolio by buying and selling a variety of different types of investments. If you are considering this type of RRSP, be sure to consult with your financial instinution HOW DO YOU GET TAXED huppo slp pa as ng isom noi I ta. The mount you pay depends on the amount you withdraw and where you live • Taking S5,000 meam the withholding tax ralea l0 • Wahdawing betwoen $5,000 and S15,000 mcam the withhelding rate in 20. TAX • Removing mne thun SI5,000 meam the withholding tax rate risa to 30 Nate Thee ta ntepply evarywhee in Canada cacept Quchec In Qubec, the falaral rates are lowe, but provincial t ate apply in addition to the federal withdrawal ate But the tuses don end there. Your tasable income will include the RRSP withdrawal for the ycar So if your marginal ta rate is higher tan the withholding ta rate you l pay extra on your withdrawal. TRX TYPES OF RRSP'S INDIVIDUAL RRSP: Retirement plan registered in the name of the contributor (Account holder) Individual SPOUSAL RRSP: A plan registered in your spouse's name and to which you are contributing The person who is contributing qualifies for tax deductions. SPOUSAL GROUP RRSP: Regular deposit savings plan that allows employees of a company to build capital for retirement through regular salary deductions GROUP SELF-DIRECTED: Atype of RRSP that can hold several different investment types (stocks, bonds) under one roof. SELF-DIRECTED
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