To better understand RRSPs

To better understand RRSPs

 
To help you get the most from your savings, let's help you debunk some common myths about registered retirement savings plans (RRSPs).

1. The RRSP is for people approaching retirement

On the contrary, the earlier you start saving, the less you will have to contribute in the end. With the compound return, you will get a return on your return.

2. The RRSP is only used at retirement

What if you bought a house? What if you financed your studies? Remember, RRSPs can be used, under conditions set by the Government of Canada, to buy your first home, through the Home Buyers' Plan (HBP), or to fund your education using the Continuing Education Incentive Plan (REEP).

3. The RRSP is an investment

The RRSP is indeed an investment vehicle. However, it gives you tax deductions. You can then grow your savings by choosing, for example, guaranteed investment certificates, mutual funds or securities, depending on your risk tolerance and your goals.

4. The RRSP causes the loss of the old age pension upon retirement

Indeed, but you must reach an annual income of $ 122,843 to lose all of your old age pension. The Old Age Security pension (OAS) decreases if personal net income is greater than $ 72,000 [Note 1]. Remember, however, that there are cash disbursement and income splitting strategies that will minimize the impact on your PSV.

5. The RRSP is useless if I have to pay tax on it when I retire

Remember, while you contribute to your RRSP, your money grows tax-free. Contributing to an RRSP allows you to defer paying tax on the amounts saved before your retirement. You will still have to pay tax on your withdrawals, but the tax rate will likely be lower than it was when you worked