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Q. What is an RRSP?
A. An RRSP is an individual savings plan that enables you to
make tax-deductible contributions over a number of years; the
contributions are invested and earn tax-free income, providing
you with savings to live on in retirement.
Q. Who is eligible to have an RRSP?
A. To be eligible to open an RRSP mutual fund account, you must
be of legal age (legal age differs from province to province), a
Canadian resident and have earned income in Canada.
Q. What are the major benefits of an RRSP?
A. Among the major benefits is that the investments held within
the RRSP grow tax-free. That is, the actual earnings on the
assets (interest and dividends) and net capital gains are not
taxed until the money is withdrawn from the RRSP. Another
important benefit is that you receive a tax deduction for your
contribution (up to certain limits).
Q. What is a spousal RRSP?
A. A spousal RRSP is an RRSP in which the plan holder's spouse
makes contributions on behalf of the planholder.
Q. What are the benefits of spousal RRSPs?
A. Spousal RRSPs are usually opened in the name of the spouse
with the lower income. The major benefit of spousal RRSPs is
that at retirement, when funds are withdrawn from the spousal
RRSP, they may be taxed at a lower rate.
Q. How much can I contribute to my RRSP?
A. There are limits on how much of your contributions are
tax-deductible and there is a penalty for those who
over-contribute. Each year, you are eligible to contribute up to
18% of your earned income from the previous year to your own
or your spouse's RRSP. Since 2003, the RRSP maximum limit has increased from $13,500 in 2002 to $14,500 in 2003 to $15,500 in 2004 and it will be $16,500 in 2005. This means that you can earn up to $91,667 before you max your RRSP contribution at $16,500. The exact dollar amount you may
contribute to your RRSP may be found on the previous year's
Notice of Assessment or by calling Revenue Canada's TIPS
hotline at (604) 669-9899.
Q. if I do not contribute the maximum limit in one year, can
I carry it forward to the next year?
A. Yes, you may carry forward any unused portion in any future
year, as long as you are still eligible to have an RRSP. You can
also make your contribution in the current year up to the
maximum amount and carry forward the tax deduction to use
in a later year. This often benefits those individuals who expect
to be taxed at a higher income tax bracket in the following year.
There is an over-contribution limit of $2,000, which allows for
miscalculations without incurring a penalty. There is no tax
deduction for this portion of your contribution, but the money
does grow tax-sheltered within the RRSP. if you exceed the
$2,000 over-contribution limit, there is a penalty tax of 1% per
month on the excess.
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| Best rates based on a minimum $5000 investment.(3/15/2010) |
| Term |
Average
Big 5 Rate |
| 1 yr |
0.46% |
| 2 yrs |
1.16% |
| 3 yrs |
1.43% |
| 4 yrs |
1.61% |
| 5 yrs |
2.00% |
| 'Big 5' refers to average rates taken from
BMO, ScotiaBank, CIBC, Royal Bank, and TD for respective terms. |
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