Who would not prefer a secure future where there will be no want of money? Every individual thinks of saving enough so that he can live a peaceful life post retirement. Though there are several ways for people to save but one which keeps its focus on retirement and ensures savings is RRSP.
RRSP is a Registered Retirement Savings Plan that helps individuals to save for their retirement and hold their investment assets. It is well know account in Canada that was first introduced in 1957 and since has been used by Canadian people to save for the retirement.
RRSP and Tax
The plan provides tax benefits:
• Contributions made to the RRSP are Tax deductible
• Offers tax deferred growth
Types of RRSPs
Individual RRSP
Here there is only one individual who is the contributor as well as the account holder.
Spousal RRSP
In Spousal RRSP, the spouse is the account holder and the income is split equally between both spouses on retirement.
Group RRSP
In this type, a person avails the plan though his/her employer who makes the required arrangements and deducts the amount (Contribution) as the employee has specified.
Withdrawal from RRSP
Though it is a good practice not to touch the money intended for saving but in case there is requirement, RRSP has room for withdrawal. One can withdraw money as per the terms and conditions specified at the beginning. However the withdrawals are liable to tax.
There are two special schemes for withdrawing which include:
• Home Buyer’s Plan (HBP)
• Lifelong Learning Plan (LLP)
In case of Account Holder’s death
RRSP allows naming a beneficiary who will get the amount in case there is untimely demise of the plan holder. Qualified beneficiaries include spouse, dependent children while other beneficiaries may be relative, friend, adult child or charity.
Overall RRSP is an advantageous plan for those who are interested in saving for their retirement.
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