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RRSP(Registered Retirement Savings Plan)
Plans are registered with Canada Custom and Revenue Agency
It provides the income at the time of retirement
Gives immidiate tax advantage
Money has Tax-sheltered growth, as RRSPs are tax defferal plans
As after retirement marginal tax rate is lower so pay less tax at withdrawal time
RRSP can be Basic RRSP, has single type of investment as GIC, Mutual Funds
It can be Self-Directed RRSP, invester manage the investment
Spousal RRSP help to split income and get tax benefit
Contribution room is lesser of 18% of earned income and maximum contribution limit
The maximum contribution limit for 2005 is $ 15500
Unused contribution room can be carried-forward
Each tax payer can withdraw upto $20,000 to buy home and return in15 years
Cashing RRSP Before Retirement
The funds which are not locked-in can be with drawn any time and are
subject to withholding tax, depends upon the withdrawn amount.This tax
can vary from 10% to 30%.
Options on Maturing RRSP
At the end of age year 69 RRSP must be terminated in three ways
-Withdraw lump sum amount and pay tax on whole amount
-Buy annuity and pay tax as you receive the payment
-Can be converted into registered income plan (e.g RRIF)
and pay tax as you receive them
For further information or to clarify any point
email:
asif@asifjaved.com