A YOUNGER PERSON’S GUIDE TO RRSPs
By Cass Schneider
A YOUNGER PERSON’S GUIDE TO RRSPs
Authors note: This is Part 1 of a series on basic money management for younger people.
People my age often put off saving until they are making more money, out of debt or more confident in their job prospects.
As a result, they often don’t realize what they’re missing. It goes well beyond the financial aspects involved.
Over the next few issues, I’ll be discussing some money management basics and how they can change your future for the better.
A Registered Retirement Savings plan (RRSP) is great place to start. You can save money for your retirement but there is so much more that you can do with it.
- You save tax money for every contribution
Your RRSP contributions can be claimed as a tax deduction so that you get a bigger tax return.
eg. You save $1000 in an RSP. You get back the tax you’d normally pay on that money. So, if you’re in a 40% tax bracket, you get back an additional $400.
- Tax free growth
While the money stays in your RRSP, it grows tax free. This allows your savings to compound faster because you’re not paying tax on your earnings every year.
- Get a “paycheque” when you’re retired
When you retire your RRSP can be transferred to a different kind of account (RRIF) which will pay you regularly so you can continue to receive monthly income.
- Use a Spousal RRSP for even greater savings
Make more money than your spouse? It can be beneficial to split your income with a Spousal RRSP so you can both stay in lower tax brackets. Higher income earners get the bigger tax savings now while you both pay lower tax later.
- RRSPs can fund your first home or secondary education.
You can use up to $35,000 out of your RRSP for the down payment of your first house. There’s no need to pay tax on the money as long as you pay it back to the RSP within 15 years. (1/15th every year).
In BC, you qualify for an education tax credit on certain education expenses.
That can offset a portion of the tax you’ll pay when you withdraw the RRSP.
There are significant benefits to start saving when you are young that I haven’t gotten into here. But if you’re just getting going, as little as $25/m will help set you on the right path.
Don’t Miss Our
Older Posts
HOW AGGRESSIVE TAXATION IS AFFECTING MULTIGENERATIONAL SMALL BUSINESSES IN CANADA
Part of the ideal of Canada is that it is a country of fairness. Whether you agree of not, there is a process in place that allows anyone to challenge an existing law or statute based on the constitution. That’s exactly what’s happening with Bill C-208...
THE PERSONALIZATION AND COMMERCIALIZATION OF HUMAN HEALTH
We’re entering the age of customized medicine and health which is tailored individually to us – not people ‘like’ us. For decades we’ve been subject to recommendations from health professionals suggesting things like people with certain blood types...
BETTER HEALTH THROUGH BETTER BREATH
Here’s some practical advice that some of our team members have practiced over the years. It is even more practical and important today than ever. There are simple breathing techniques, which if done with some regularity have been proven to...
BEWARE OF RRSP OVER-CONTRIBUTIONS
SEAN SCHNEIDER on ONE THING THE BUDGET GOT RIGHT
One thing the Canadian government seemed to get right in this year’s election orientated budget was the increase in RSP allowance first time home buyers are eligible to withdraw for a down payment. Too many hard-working younger generation Canadians are finding...
A CHANGE IN THE COURSE OF HUMAN HISTORY?
A new satellite cell phone company may be on the cusp of changing human history. By deploying a new approach using nanosatellites, Ubiquitlink appears poised over the next few years to connect the planet’s whole off-grid population to the Internet. Nanosatellites are...
The Coming Canadian Debt Calamity?
You may be in for a shock over the next few years as the well-meaning though overly generous Federal and Provincial government spending and policies come home to roost. Canadians are borrowing money at a record rate bringing with it rapid inflation. We are nearing...
THE REMARKABLE RISE OF A BETTER WORLD: WHY HUMANITY IS THRIVING AS NEVER BEFORE
The world is not fair, equitable, just or even enjoyable for large swaths of humanity. When we watch the news, which is saturated with the misery of war and turmoil, it can feel like we’re all going down little by little. I actually can’t remember a time...
Reclaiming Your Privacy: How Using Incogni Can Minimize the Threat of Hacking
Here’s a tool our team at Schneider Insurance is testing. It helps to automatically reduce your chances of getting hacked while also and also pesky telemarking calls. It’s called Incogni and it automates getting your data out of databrokers databases. In...
AI AND FINANCIAL PLANNING
The rapid evolution of artificial intelligence (AI) is about to transform various industries, and the financial planning industry is no exception. With advancements in machine learning, data analytics, and automation, over the next few years AI is expected to reshape...
