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Frequently asked questions about RRSPs

» What is a Registered Retirement Savings
   Plan (RRSP)?
» How else can I benefit from an RRSP?
» Who can contribute to an RRSP?
» What is earned income?
» When is the best time to invest in an RRSP?
» How much can I contribute each year?
» How can I make RRSP contributions if I do not
   have the money?
» What investment options are available to me
   with an Envision RRSP?
» What if I need my RRSP savings before I retire?
» What is a spousal RRSP?
» What if I don't use my maximum RRSP deduction
   limit in a given year?
» When can I close my RRSP?
» When will my RRSP be subject to tax?
» What can Envision do for me?
» Why should I transfer my RRSP to Envision?

What is a Registered Retirement Savings Plan (RRSP)?

An RRSP is a government-approved plan you use to save money for your retirement years. Your contributions, within limits, are tax deductible, and the income earned is tax sheltered.

How else can I benefit from an RRSP?

Contributions to an RRSP are tax deductible (within your allowable limits). That means you can reduce your taxable income for each year that you make a contribution. Also, the earnings of your plan are not taxed until you withdraw them. And because your savings can grow tax free in an RRSP, they increase much faster than they would elsewhere.

RRSPs are not solely used for retirement anymore. Some Canadians are using their registered savings

  • To fund education-Under the Lifelong Learning Plan you can withdraw a maximum of $20,000 from your RRSP over four years to enroll in a qualifying educational program. All withdrawals have to be paid back within 10 years.
  • To buy a house-If you are a first-time homebuyer, you can withdraw up to $20,000. All withdrawals have to be paid back to an RRSP within 15 years.
  • As a cash reserve-In an emergency, you can withdraw funds from your savings account. In this case, all withdrawals are subject to income tax.

Who can contribute to an RRSP?

Anyone who earned income subject to Canadian taxation, including non-residents, may contribute to an RRSP.

What is earned income?

Earned income includes salary or wages, rental income, alimony received, net business income, and Canada Pension Plan and disability benefits, etc. Earned income does not include investment income, retirement allowances, taxable capital gains, pension plans, etc.

When is the best time to invest in an RRSP?

The sooner you get your money working for you, the more you'll have when you need it. That's the magic of compounding interest. Delaying can cost you more money than you think. The best time to start is as soon as you have earned income and as early as possible in the current tax year.

How much can I contribute each year?

The maximum RRSP contribution you may deduct for the current year is 18% of your earned income for the prior year up to the maximum of $13,500 less your pension adjustment (PA). Unused RRSP contributions from 1991 onward can be carried forward to subsequent years indefinitely. RRSP contributions need not be used as a deduction in the taxation year they are made. There is no limit on when the deduction may be claimed.

How can I make RRSP contributions if I do not have the money?

If you have a hard time coming up with the cash to make your maximum RRSP contribution, Envision Investment Services has two ways to help you:

  • An RRSP loan allows you to make your contribution before the deadline for the current tax year.
  • Our pre-authorized contribution plan automatically transfers money from your account to your RRSP. Invest small amounts on a regular basis-even $50 a month-and you'll earn more on your RRSP than you would by contributing an annual lump sum.

What investment options are available to me with an RRSP?

An Envision RRSP is designed to meet your needs for security, flexibility, and growth. You can select any one or a combination of these investment options:

What if I need my RRSP savings before I retire?

You can make withdrawals from your RRSP in whole or in part, provided your investment options are redeemable at the time. The money you withdraw is taxable and will be reported on a T4 RRSP by the issuer of the plan.

You can withdraw a maximum of $20,000 over a four-year period to finance your education-full-time training or higher education of at least three months duration. Repayment to your RRSP must be completed within 10 years.

If you are a first-time homebuyer, you can withdraw up to $20,000. All withdrawals have to be paid back to an RRSP within 15 years.

What is a spousal RRSP?

With a spousal RRSP, you can direct part or all of your maximum allowable contribution to an RRSP in your spouse's name. A spousal RRSP will help you save tax during retirement through income splitting, since the income eventually created from the funds will then be taxed at your spouse's lower tax rate.

What if I don't use my maximum RRSP deduction limit in a given year?

Your unclaimed RRSP deduction limit from 1991 onward can be carried forward indefinitely. In addition, you do not need to claim your RRSP contributions as a deduction in the taxation year that they are made.

When can I close my RRSP?

You may close your RRSP at any time, but you must do so before the end of the calendar year in which you reach age 69. You can choose to

  • Withdraw funds and pay taxes on the full amount, or
  • Select a retirement income option.

The Income Tax Act provides three retirement income options:

As a retirement income option, you can also set up a self-directed RRIF through Envision Credit Union.

When will my RRSP be subject to tax?

Your RRSP helps you look forward to your retirement by allowing you to pay yourself in the form of tax-sheltered contributions. Any growth within your RRSP is not subject to income tax until you withdraw the money. So your savings accumulate and grow tax-free.

What can Envision do for me?

Envision can help you to decide which investment route to take. We can help you to put together your RRSP investment strategy. Call your nearest branch to make an appointment. Choose from a full range of eligible RRSP investment products to meet your needs and to give you the opportunity to maximize your RRSP's potential for growth. Our family of investments include:

Envision can also lend you money to make your RRSP contribution. An RRSP loan gives you choice, flexibility, and a competitive rate. And with our pre-authorized contribution plan money is automatically transferred from your account to your RRSP. Invest small amounts on a regular basis-even $50 monthly-and earn more on your RRSP than you would by contributing an annual lump sum.

Why should I transfer my RRSP to Envision?

You should transfer your RRSP to Envision because we offer:

  • Highly competitive rates of return
  • A variety of investment options to meet your retirement goals
  • Friendly RRSP specialists to handle all the paperwork

For more information, please call your nearest branch.

*Mutual funds are offered through Credential Asset Management Inc. and mutual funds and other securities are offered through Credential Securities Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual funds and other securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated. Credential Securities Inc. is a Member-CIPF. ®Credential is a registered mark owned by Credential Financial Inc. and is used under licence.

 
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