RRSPs are remarkable investment vehicles. An RRSP or Registered Retirement Savings Plan is an investment account registered with the federal government. RRSP’s provide you with tax benefits for retirement in Canada. By contributing to an RRSP you are lowering your income at tax time through the form of a tax credit gifted to you by the government. As long as your money is kept in your RRSP it is sheltered from taxes and can continue to grow on a tax deferred basis.

Types of RRSPs
  1. Individual RRSP: An individual RRSP is set up for a single person known as the account holder or contributor.

  2. Spousal RRSP: A spousal RRSP allows the higher income earning spouse, known as the "spousal contributor", to contribute to an RRSP in the name of the lower earning income spouse. After a period of two calendar years beginning in the year following the contribution, the funds can be withdrawn in the name of the lower earning income spouse. The funds are taxed in the name of the lower income earning spouse. By doing so, the lower income earning spouse is taxed at a lower marginal tax rate had the funds been withdrawn by the higher income earning spouse. This is an excellent way of splitting income at retirement between both spouses.

There are many types of investments that can be contained within an RRSP. Funds can be invested in:

  1. Interest earning accounts such as GIC’s, treasury bills...
  2. Fixed income accounts such as bonds, preferred shares...
  3. Equities such as stocks, mutual funds...

To know your RRSP Limit call Canada Customs and Revenue agency CCRA at 1-800-959-8281 and press option number 2 followed by option number 1. Or visit RSP Limits

Registered Retirement Income Fund (RRIF)

RRSPs and RPP's (registered pension plans) do have a limited timespan. They must be cashed in or converted into an annuity or RRIF before the end of the year in which you turn 71. The RRIF is designed to allow you to keep your money growing tax sheltered within it and receive a constant income flow through your retirement years in the form of withdrawals from it.