RRSP Season Insights - #2
Friday, February 01, 2013 by: Baytoday Business Wire
Feature, BayToday.ca- Kingsdale Capital Markets
- Tim Hutchison
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RRSP Season Insights: Article 2 of 7
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Investing in RRSPs
As the Registered Retirement Savings Plan (RRSP) deadline approaches, investors across Canada are scrambling to determine how much money they can, and should, contribute to their RRSP. RRSPs are designed to help Canadians save money for retirement income. Every year more and more Canadians choose to invest in Registered Retirement Savings Plans (RRSP) as part of their long-term investment portfolio.
There are a number of ways RRSPs help investors save money for retirement:
- Contributions you make to an RRSP directly reduce your net income and allow you to pay less in taxes, typically leading to a tax refund.
- Returns generated by your investments (interest, dividends, capital gains) continue to grow tax deferred until withdrawn from your RRSP account.
When you decide to retire and begin to withdraw money from your RRSP account, your annual income will likely be lower than when you were working and making contributions to your RRSP. This means that you will likely pay a lower tax rate on the funds you take out of your RRSP.
RRSPs are not only designed to help you save for retirement, but can also be used to fund school expenses and your first home purchase.
You still have time to make a contribution to your RRSP - contributions made on or before March 1st, 2013 will help reduce your 2012 income taxes.
Deciding how much to contribute to your RRSP depends on a number of factors, such as your age, income and personal situation. As we mentioned earlier this week, your investment plan will change over time, as will your mix between retirement savings and other investment options.
Contributing to your RRSP will help you save money for retirement and can provide you with a tax return which you can contribution to your Tax Free Savings Account (TFSA). On Monday of next week we will discuss the benefits of investing in a TFSA.
Kingsdale Capital Markets
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Timothy Hutchison is a Financial Advisor at Kingsdale Capital Markets.
He lectures part-time at Nipissing University and is a member of the Kiwanis Club of Nipissing.
He holds a BComm (Hons.) and MBA.
