50 absolute ave unit 3806 Mississauga Ontario L4Z0A8
50 absolute ave unit 3806 Mississauga Ontario L4Z0A8
One of the most important retirement and tax planning strategies available to Canadian taxpayers is contributing to an RRSP. Under certain restrictions, contributions made to a plan no later than 60 days after the end of the current year may be deducted from income in the next year.
The foundation of your retirement
An RRSP offers both short-term and long-term tax benefits that can aid in funding your desired retirement.
Generally, your contribution limit is calculated by the Canada Revenue Agency based on these 3 factors
You will be taxed 1% per month on any amount that is more than $2,000 over your contribution limit. If you don’t pay the additional tax within 90 days after the calendar year, you’ll face late-filing penalties or interest charged.
It is a retirement savings and investment account that is authorised by the Canada Revenue Agency (CRA) and offers Canadians advantages to save for retirement. You pay less income tax since the funds you contribute to an RRSP aren't included in your taxable income.
It differs from a regular savings account in that it serves as a place for investments where any growth is tax-free until the money is withdrawn. When you withdraw your money, you will typically be retired, which means that you will pay less tax than during your years of greater income and be able to keep more of your money for retirement.
Your taxable income is decreased by contributions to an RRSP, allowing you to save for retirement while paying less income tax.
You don’t pay tax on the growth of your investments in your RRSP until you withdraw it so you can keep more of your money.
Use money from your RRSP to help buy your first home or fund you or your spouse’s education.
By reducing your taxable income at the same time as you save, you’ll essentially be paying yourself twice. Let’s imagine you have an annual salary of $80,000 and elect to contribute the maximum amount allowed to your RRSP, which is $14,400. Only $65,600 of your income will be taxed by the CRA when it comes time to file your taxes.
Unless you withdraw money from your RRSP, usually in retirement when your tax rate is lower, any increase on your investments is tax-sheltered.