registered retirement savings plan (rrsp)

An RRSP is a retirement savings plan that you establish, that is registered by the federal government, to which you or your spouse, or common-law partner contribute. Deductible RRSP contributions can be used to reduce your income tax. The biggest advantage of an RRSP is that the interest compounds over the life of the plan without any tax on the capital gain whilst the funds remain in the account.

Once used as a source of income at retirement you generally have to pay tax when you receive payments from the plan. Contributions can continue to be made until age 65, however, funds must be withdrawn by age 71.  To avoid taxation at age 71 a rollover from the RRSP to a RRIF (Registered Retirement Income Fund) is made, thus transferring the funds from one registered account to another. Whilst any amount can be withdrawn as income, which is then subject to tax, all that needs to be withdrawn is a small basic yearly amount, leaving the balance to continue to grow.

As approximately 93% in Canada live to the standard retirement age of 65, the concern of outliving your income often creates a lot of anxiety. We at Keyfactor Financial Solutions Inc., will at any age help establish a retirement plan, anticipating income requirements at the time of retirement. Having a plan in place during your working alleviates the worry of insufficient income during your retirement years thereby allowing you to look forward to your nonworking life.