Why are you afraid of RRSP’s?
Registered Retirement Saving Plans, or RRSP, are a tax-sheltered, personal savings plan designed to help you save for your retirement, enabling you to retire with wealth but without the tax headaches. If you have a supplementary retirement savings plan you could possibly retire earlier than the regular 60 – 65, so why is it that many Canadians are afraid to invest in themselves?
Out of 16 million tax paying Canadians only 56% (age 25 – 44) invest in an RRSP.
This tax shelter protects a portion of your current income, offsetting income tax while your income is probably at it’s highest. By the time you withdraw your funds your annual income will be less and you will benefit from a lower tax bracket.
When it’s time to purchase your first home you are able to withdraw your RRSP, tax-free, and use it toward the downpayment. Under the Home Buyers Plan you have 15 years to repay the balance at an equal repayment amount per year before you are taxed on the amount withdrawn.
For example: If you withdraw $10,000 for your first home, the repayment rate would be $666 per year.
With no interest it’s a win-win option.
The same goes for the Life Long Learning Plan, want to get that degree you have on your bucket list? Tired of the career path you are following? Go back to school and use your RRSP to fund your education.
The 2016 contribution limit is 18% of your earned income to a maximum of $25,370. What is your earned income? See Chart # 3 to see the calculation.
Starting to invest in yourself can easily be explained with a quick visit to your bank, truth be told you are probably there at least once per week anyway, what’s the harm in a chat. There is no minimum payment, whatever suits your budget and it can be deducted from your bank account monthly. As little as $25 per month can start you off.
It’s never to early to invest in your future but leave it too long, and it could very well be too late.