Retirement Saving:
RRSPs & RRIFs
Planning your future Perth County Courthouse - Stratford - Carol Rawlings
What is an RRSP? A registered retirement savings plan (RRSP) is a government approved plan through which yu save money for your retirement years. Your contributions, within limits, are tax deductible, and the income earned is tax sheltered. You can have any number of plans.
What does an RRSP mean to you? You are investing money when you can most afford it during your peak earning years - to build up a comfortable retirement fund. Not only do you invest some money that would otherwise be paid in taxes, but the earnings of your plan are not taxed until you withdraw them. since 100% of these earnings can be reinvested and compounded, the growth of your RRSP increases rapidly over the years.
An RRSP is an investment in your future, with benefits you can enjoy today. By contributing to an RRSP, you can take advantage of substantial tax savings now, and enjoy peace of mind in knowing you’ll have a financially secure retirement. Plus, your RRSP dollars are completely tax sheltered as long as they remain in the fund.
Whether you’re starting your first job, just starting a family, or finally hitting your peak earning years, RRSPs will likely play an important role in your long term financial plan. No matter what stage of life you’re in, we can help you make the most of your allowable RRSP contributions.
Making your money count
We’ll help you find a way to fit RRSP contributions into your current financial plan, so you can fully enjoy the tax benefits. We’ll also show you how RRSPs can give you control over your financial future, so you can enjoy the retirement of your dreams.
How safe are RRSP investments? Your registered plan deposits at YNCU are protected by unlimited insurance through the Deposit Insurance Corporation of Ontario (DICO). Deposit insurance is part of a comprehensive depositor protection program for all Ontario credit unions which is backed by provincial legislation. Most, but not all, types of deposits are insured. Read more.
How does an RRSP provide retirement income? Regular contributions to an RRSP will result in a substantial accumulation of savings. When you desire income, you can invest your savings in one or more of three retirement income options. Read more about Registered Retirement Income Funds and your retirement income options here.
The convenience of monthly deposits
Maximize your money by depositing your RRSP contribution monthly. The interest earned is compounded, which means you’ll be earning interest on the interest! In the long run, this can have a dramatic effect on your investment. We can help you benefit from the monthly deposit advantage, by automatically transferring funds from your chequing account to an RRSP. It’s convenient. It’s painless. And it’s as easy as signing an authorization form at your branch.
When should I start saving for retirement?
Now. The sooner you start to save, the longer your money has to compound and grow (you earn interest on the amount you contribute, plus interest on the interest).
Pay down the mortgage, or contribute to an RRSP?
You can do
both. Time is on your side, so the sooner you start saving, the more
your investment will grow. Try to maximize your RRSP contribution, then
use any tax refund you get to pay down your mortgage.
Who can contribute to an RRSP?
Anyone 18 to 71 years old who earns an employment or self-employed income, or who has unused contribution room.
How much can I contribute?
Look at the Notice of Assessment you received with last year’s income tax statement. The amount you can contribute this year includes any unused contribution room.
When can I contribute? You can make an RRSP contribution at any time during the year. The contribution deadline for any taxation year is 60 days into the next calendar year. Most Canadians still make their contribution in the two weeks before the deadline. You can avoid the stress of trying to find money for your RRSP by starting early and making monthly payments.
RETIREMENT INCOME FUNDS (RIF)
You've planned ahead by saving for your retirement and you're ready to enjoy all the leisure and opportunity available to you. But now there's a major decision to be made: What do you do with your retirement savings? Choosing the best option means examining the lifestyle you plan to enjoy during your retirement, along with other factors, and we're here to help guide you.
A Registered Retirement Income Fund or RRIF is one of the most flexible ways to convert your RRSP into an ongoing source of income.
A RRIF is like an RRSP in reverse: Your investment continues to grow tax-deferred and remains directly under your control. However, instead of making regular contributions, you make regular withdrawals according to a predetermined schedule. These withdrawals then become taxable upon receipt. RRIFs also give you the flexibility to increase your income or take lump-sum withdrawals whenever you choose.
You can convert your RRSP to one or several retirement income options at any age. But you must terminate it no later than December 31st of the year in which you turn 71. While you could withdraw all the money from your RRSP as a lump sum before then, and pay tax on it accordingly, by far the best choice is to transfer the funds to an option that will make payments to you over a period of time and continue tax sheltering income in the plan.
There's a wide choice of retirement income options available today including GICs, equities and others, providing you with the flexibility to manage the ongoing growth of your investment. While having so many options is good in some ways, it can also be confusing unless you understand the differences and are able to choose the ones best suited to your needs.
Canadians may choose from three different ways of generating retirement income from their RRSPs. These are:
- A Registered Retirement Income Fund (RRIF) which puts you in control of your investment and the amount of income it pays you
- A Life Annuity which guarantees a fixed income
- A Term Certain Annuity to age 90 (TCA 90) which gives you some control over your investment and earnings.
In Ontario, there are two additional income plans:
- A Life Income Fund (LIF) which combines the benefits of both a RRIF and a Life Annuity
- A Locked-In Registered Retirement Income Fund (LRIF) where pension money from a Locked-In Retirement Account (LIRA) or locked-in RRSP can be transferred.
After reviewing the options available most people decide that a RRIF best meets their needs. A RRIF earns money from investments, just as your RRSP did.
Canada Revenue Agency (CRA) requires that you receive at least a minimum payment from your RRIF each year, but beyond that, your RRIF can be completely customized to meet your budgetary needs. As long as funds remain in your RRIF, they are tax sheltered and continue to grow.
Answers to your retirement savings and income option questions ... These
questions, and many more, are answered in our information-packed guide books, which you can download for free, or pick up a copy
at your branch. If you prefer, we will mail a copy to you ... just send
us a request by email to info@yncu.com. Ask for a copy of your choice of the guidebooks listed below - don't forget to include your full name
and mailing address!
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