In Canada, we have two public retirement income programs – Old Age Security (OAS) and the Canada Pension Plan (CPP). While you’re still allowed to accumulate your own savings in registered pension plans or registered retirement savings plans, these two programs ensure that all Canadians get a basic level of income when they retire.
Registered Retirement Savings Plans (RRSPs) let you contribute to your savings while benefiting from tax deferral.
This is because any contributions you make to your RRSP are deducted from your taxable income in the year that they are made. Any amount withdrawn at a future date, including interest income earned on investments, will be taxed at that year’s applicable rate.
Now that we’re in the new year, it’s too late to maximize most of your tax credits and deductions for your 2020 tax return. There is, however, one tool remaining that you can use to minimize your tax owing from 2021 and that’s RRSP (registered retirement savings plan) contributions.
When you put money into your RRSP (Registered Retirement Savings Plan) you can deduct the amount you contribute from your taxes in the same year. If you withdraw funds from your RRSP you would then have to pay the applicable taxes on that amount.
Registered retirement savings plans are one of the last minute tax planning strategies that most Canadians can take advantage of. That is because the period for making contributions in any given tax year ends 60 days after the end of the calendar year. That being said, there are some instances where your RRSP tax strategy needs to be considered before December 31.
Planning for the future is critical but, when developing your savings plan, it is important to consider other factors such as your current financial situation and tax planning, as well as your short-term and long-term goals.
There are a number of saving tools available to Canadians, depending on your goals – Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), Registered Education Plans (RESPs), Registered Disability Savings Plans (RDSP), Pooled Registered Pension Plans, and more.
When it comes to planning for your financial future, Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) are some of the most common and useful savings tools available to Canadians.
But before you decide where to put your money, it is important to understand the similarities and differences between the two.
While it may not be the first thing that comes to mind when we ask ourselves what we want to do with our discretionary income, contributing to saving plans is critical to an enjoyable retirement.
The deadline for 2017 Registered Retirement Savings Plan (RRSP) contribution is March 1, 2018, which means many of us are dealing with the annual decision of whether we should put our savings into an RRSP or a Tax-Free Savings Account (TFSA).