RRSPs and RRIFs

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What are RRSPs? A registered retirement savings plan is a device used to save money for retirement. The significance of "registered" is that Canada Customs and Revenue Services (formerly called Revenue Canada) allows you to deduct from your income the amount you deposit each year, up to prescribed limits. Simply put, if you earned $50,000 this year and placed $5,000 into an RRSP, you would only pay the tax on the remaining $45,000. As well, as money grows within the RRSP, that growth is not taxable. If your RRSP earns 10%, that new 10% stays in the RRSP. Tax sheltered growth over many years allows your Registered Retirement Savings Plan to grow at a faster rate than a "non-registered" plan earning the same return. So… then what is a RRIF? Sometime before the end of the year that you turn 69, you must move your RRSP into a Registered Retirement Income Fund. In many ways, an RRIF is like an RRSP; growth within the RRIF is not subject to annual taxation, and for the most part, the investment options are the same. The difference between the RRIF and RRSP is that you must take income from the RRIF. There is a minimum amount you must take out, depending on how old you are when you start the RRIF, and you can take more than the minimum. Ask us about how basing your RRIF on your spouse's age may benefit to you. Remember, the money you withdraw from the RRIF is taxable income. All those years of deducting RRSP contributions from your taxable income helped to build this RRIF balance and Ottawa now wants the tax on this income. At Braun Financial, we tailor RRSP and RRIF programs to suit the particular needs of each client. We take into account your risk tolerance, time horizons, company and government pensions and lifestyle objectives to create a program that is right for you. Then we work with you through the years to ensure the ongoing success of your plan. RRSPs and RRIFs are a key component to any long-term savings program. We will be happy to get you started, or if you already have a program but feel that you need help, give us a call.