Have you started saving for your golden years yet? It’s never too early or late to start! Not every Canadian citizen has a pension plan set up with their employer and if you’ve never thought about an RRSP you should strongly consider having that discussion with your accountant today.
One of the most common questions we receive from our clients is; “What is an RRSP?”
What is an RRSP?
RRSP stands for “Registered Retirement Savings Plan” and is one of the most common ways to save for retirement and the later stages of life. It’s a personal savings plan that you typically grow during your working career with the main goal of contributing a portion of your salary to amass a comfortable cushion financially for your retirement days.
If you’re eligible for a Canadian pension plan you should be advised that your CPP generally only provides retirement income for the bare minimum necessities. Generally, it’s not the level of support that one would need to live comfortably and securely. It’s said that depending on your level of income and the type of lifestyle that you’re trying to sustain that you should save anywhere from $250,000 to $850,000 dollars as a “nest egg”.
The benefits of RRSPs
Retiring comfortably should be top of mind for most Canadian citizens as the benefits of saving for retirement through an RRSP can provide long term security. Here are some of the benefits that accompany an RRSP If you’re still asking yourself “why should I invest in an RRSP?”:
• The tax benefits it provides allow you to defer and shelter income to pull out at a later date in retirement in a lower tax bracket.
• Reduces your annual tax return by being tax deductible.
• Ability to set up spousal RRSP. By doing so it can help evenly split retirement income more evenly which can be beneficial in offsetting taxes paid if one partner has higher income levels versus another.
• You can easily set up an RRSP through a trusted financial institution such as a bank or an insurance company.
We encourage you to start thinking about the importance of your future and taking the leap into planning for your retirement years. You’ll be quite thankful to have been mindful of it. How will you spend your time? Will you vacation across the world, spend it with family, volunteer, golf, or will you ride your motorcycle into the sunset? Whether you’re looking for RRSP information, for sound solid financial advice or accountants that will help shape your financial future our specialists at Al-Mulla CPA can help.
