Find the Best RRSP GIC Rates
Thinking about opening a RRSP? Let Ratehub.ca help you find the best RRSP GIC term and rate.
Registered retirement savings plans (RRSP) are an attractive way to save for retirement. That said, it’s important to note that there are a number of rules governing these accounts. Understanding these regulations will allow you to maximize your retirement savings while not incurring any unforeseen tax penalties.
Thinking about opening a RRSP? Let Ratehub.ca help you find the best RRSP GIC term and rate.
Pretty much everything related to RRSPs is regulated by the Canada Revenue Agency (CRA), which administers tax laws for the federal government. This includes:
With RRSPs, there’s no minimum age. As long as a Canadian has employment income and files a tax return, they (or their guardian) may set up and contribute to an RRSP. This contrasts with tax-free savings accounts (TFSAs), which require a Canadian to be at least 18 years of age.
However, there is a maximum age for RRSPs. When Canadians reach the age of 71 they must close down their RRSPs at the end of the calendar year. Those who have RRSPs have three options when they reach 71. They can:
You’re allowed to designate one or more individuals as a beneficiary for your RRSP in case you die. If you don’t specify a beneficiary, the proceeds of the RRSP will form part of your estate and be divided accordingly.
There are three situations in which an RRSP can remain tax-sheltered upon your death:
Every year, any Canadian is permitted to make a contribution to their RRSP. The amount of this contribution is the lesser of:
Any unused contribution room carries forward for future years, meaning you don’t lose out just because you have not maximized your contribution in a particular year.
Keep in mind that any contributions from a group or company pension plan must be deducted if you are calculating how much you can contribute to an individual RRSP account.
The CRA lets Canadians know how much contribution room they have for the next year on their notice of assessment. Contributions must be made during a taxation year or within the first 60 calendar days of the next year in order to qualify for a tax deduction for the prior year’s taxes.
There are tax consequences for making an RRSP withdrawal before you retire. If you take money out of your RRSP early, you will be subject to the following taxes:
There are two scenarios in which you can withdraw money tax-free from your RRSP:
It’s important to familiarize yourself with the key rules about RRSPs. Doing so allows you to use these structures to their maximum benefit while avoiding potentially costly pitfalls.