Registered Retirement Savings Plan (RRSP) provides tax benefits to Canadians under the age of 71, who are saving for retirement. The following can be held in an RRSP: savings accounts, guaranteed investment certificates (GICs), bonds, mortgage loans, mutual funds, income trusts, corporate shares (stocks), and labour-sponsered funds.
On or before your 71st birthday, you must convert your RRSP into a Registered Retirement Income Fund (RRIF) or life annuity to continue deferring your taxes. If you do not convert it to a RRIF, the entire amount of your RRSP will be withdrawn and is fully taxable as income. To defer the taxation, simply transfer your RRSP investments into a RRIF.
If you are over 71, a RRIF is a tax-deferred plan which an individual can generate income from the savings in their RRSP. The difference between the RRSP and a RRIF is that with an RRSP you are saving for your retirement. A RRIF is providing you income from your savings. Once your savings are transfered into a RRIF, you can no longer continue to contribute to your retirement. Instead, your money continues to grow inside your RRIF, and you are required to take a minimum RRIF withdrawl which is cashed out of your account and sent to the account holder without withholding tax. The RRIF withdrawl is taxable income, but is eligible for a tax credit.
Make an appointment with Elvine Skoretz to review your retirement needs.
AEI Wealth Management
4802 - 51 Ave.
Red Deer, AB, T4N 4H2
(403) 342-5410 - Fax