RRSP 101 (All RSP questions answered)

Poll:RRSP 101 (All RSP questions answered)
Choice Stats
I find this info useful, thanks. 83% (20)
this is basic info, i know this already! 17% (4)


Jump to Page:
< Previous  [ 1 ]  [ 2 ]  [ 3 ]  [ 4 ]  [ 5 ]  [ 6 ]  [ 7 ]  [ 8 ]  [ 9 ]  [ 10 ]  [ 11 ]  [ 12 ]  [ 13 ]  [ 14 ]  [ 15 ]  [ 16 ]  [ 17 ]  [ 18 ]    Next >




Poll:RRSP 101 (All RSP questions answered)
Choice Stats
I find this info useful, thanks. 83% (20)
this is basic info, i know this already! 17% (4)

TO-Puttar   
Member since: Jan 06
Posts: 15
Location: Toronto

Post ID: #PID Posted on: 29-05-06 02:19:07

Hi Friends,

I have noted down some genreal RRSP questions, i receive as a personal banker, and tried to answer them in simple terms.


1. What is RRSP ?
Ans. Registered Retirement Savings Plan

2. What is the use of RRSP?
Ans. To save for retirement, and for tax benefits.

3. What tax benefits can I get?
Ans. Any money you save in a RRSP account is tax deductible upto your "contribution limit". However you will pay tax when you take money out of the RRSP account or at the age of retirement. (I will explain more on taking out money without paying tax)

For Example: Your income is $30000 and you pay 33% tax. If you contribute $2000 this year you will get a tax refund of $660 (this is not including other refunds you may get)

4. What is an RRSP account?
Ans. It is just like a bank account, you can open it with any bank in Canada. Also you can save money in different types of RSP's. For example: If you want to save $2000 in RRSPs, you can put $1000 In a GIC within the RSP i.e., RRSP-GIC and $1000 in a Mutual Fund RRSP. Or if you want to save regularly, say $100 ever month - you can have a simple RSP account.

5. How many RRSP's can I have?
Ans. As many as you like, and in 2-3 different banks if you wish, but you can only contribute upto your limit every year. This is called \"Contribution Limit\" , it is given on your Notice of Assessment (i.e. this year's NOE will give your limit for next year)

6. Can i contribute in the name of my wife/husband?
Ans. Yes, you may - even if your spouse is not working. You as the contributor will receive the tax receipt and benefits.

7. How to claim the tax benefits?
Ans. When you put money in a RRSP account, your bank will issue an \"RRSP Contribution Receipt\". You can attach the receipt when you file your taxes to get your refund.

8. What happens if i take money out of the RRSP account?
Ans. You will pay a \"Witholding Tax\" to the CRA and the amount will count as income for your next year's taxes.

For Example: If you withdraw $5000, 10% i.e., $500 will be deducted and you will get $4500, then you will have to pay tax on $4500 when you file your taxes.

9. How can I avoid Taxes when I withdraw from my RRSP account?
Ans. There are 2 cases when you can withdraw without paying tax:

(1) First time Home Buyer's Plan (HBP): Under this plan you can take upto $20,000 out of the RRSP account balance, without paying tax, if you are a frist time home buyer. Your spouse can also withdraw under HBP.

For Example: If you have $20,000 and your spouse has $20,000, in RRSP accounts. Lets say both are paying 33% income tax. When you buy your first house you can take $40,000 without any deduction. So you end up saving $13200. In other words - the government gave you a break because you are buying a house.

(2) Life Long Learning Plan (LLP): You can withdraw without tax, if you are going for higher studies (like MBA/MS). LLP works the same way as HBP., except the limit is upto $10,000 per year - and $20,000 max.

Some other rules apply for LLP, please refer to CRA website.

10. Is it complicated to invest in RRSP's?
Ans. No, because, it is your banker's responsibility to fill the forms and give you tax receipts.

Also, please refer to the RRSP section at CRA website> http://www.cra.gc.ca" rel="nofollow">LINK


Hope this helps you take advantage of tax benefits available to all Canadian residents, if you have questions - please ask here.

Sincerely,



Big Vee   
Member since: Jan 05
Posts: 456
Location: Canada-Glorious and Free

Post ID: #PID Posted on: 29-05-06 09:56:27

Thank you for that lesson in RRSPs, TO-Puttar.

I want to show CDs how to split incomes using RRSPs in cases where one of the spouses is earning less than the personal amount (around $ 9,000 pa). This is also a way to withdraw money from an RRSP without taxes.

The spouse earning more than $9,000 pa can contribute to a spousal RRSP. This is Point #6 in TO-Puttar's overview. The RRSP is in the name of the spouse earning less than $ 9,000 pa. The contributing spouse gets the tax benefit of the contribution.

Later, it can be withdrawn by the lower income spouse and reported as income on his/her tax returns. The amount withdrawn may be subject to withholding which is refunded when the Tax return is filed. There is no tax implications since the amount is lower than the personal amount.

NOTE:- the amount should be less than the personal amount for your province. Timing is critical and you should consult a financial planner to help in this matter.

BV



TO-Puttar   
Member since: Jan 06
Posts: 15
Location: Toronto

Post ID: #PID Posted on: 29-05-06 15:25:23

Quote:
Originally posted by Big Vee

Later, it can be withdrawn by the lower income spouse and reported as income on his/her tax returns. The amount withdrawn may be subject to withholding which is refunded when the Tax return is filed. There is no tax implications since the amount is lower than the personal amount.

NOTE:- the amount should be less than the personal amount for your province. Timing is critical and you should consult a financial planner to help in this matter.

BV

:up:
Hi BV,

In general it is safe to follow this example:

If Mr.X contributes $5000 in 2006 - to his spousal RSP in the name of Mrs.X.
Mrs. X as the planholder cannot withdraw this 'new contribution' till Mr.X files his taxes in 2007 and reports his spousal RSP contribution. If she does then the witholding tax ($500) will not be refunded and Mr. X would have to show $4500 as his 2006 income.

As BV said, tell your FA/banker that you want to avoid tax, and the banker will tell you when you can withdraw.



BlueLobster   
Member since: Oct 02
Posts: 3409
Location: Mississauga

Post ID: #PID Posted on: 29-05-06 15:28:50

Good stuff, guys!

I'll make this post a sticky, please continue all RRSP related info here.

Thanks!


-----------------------------------------------------------------
Are you there?


Toronto_Puttar   
Member since: Dec 04
Posts: 15
Location: Toronto

Post ID: #PID Posted on: 29-05-06 16:02:49

Quote:

5. The RRSP Contribution Limit is given in your prior years notice of assessment issued by CRA

6. Once the money goes into a spousal account, only the spouse has access to that money. Even you as a contributor cannot withdraw.

8. The amount withdrawn is considered as income in the year in which the withdrawal occurs.

9 For an HBP, the money has to be deposited atleast 90 days prior to withdrawal.

Sudershan



Big Vee   
Member since: Jan 05
Posts: 456
Location: Canada-Glorious and Free

Post ID: #PID Posted on: 29-05-06 21:27:01


You can hold many kinds of investment in an RRSP. From savings account, GICs, Stocks, Bonds, mutual funds and even mortgages. There is no limit to the types of investment vehicles you can use. There is no limit to the financial institutions you can use. With the recent removal of foreign content restriction you can invest in any of those vehicles above in any country. So you could hold stocks from Mumbai, Bonds from Dubai and mutual funds from the UK.

BV



sw33tc0rn   
Member since: May 06
Posts: 5
Location:

Post ID: #PID Posted on: 01-09-06 18:05:19

Hi Friends,

Can I contribute in my spouse's name even though she is unemployed for the entire year?

Any details / pointer are appreciated.



By TO-Puttar \"

6. Can i contribute in the name of my wife/husband?
Ans. Yes, you may - even if your spouse is not working. You as the contributor will receive the tax receipt and benefits. \"




Discussions similar to: RRSP 101 (All RSP questions answered)

Topic Forum Views Replies
RRSP ( 1 2 )
Accounting and Taxation 1792 7
Nine ways to save on taxes using RRSPs ( 1 2 3 )
Financial Planning 5482 19
Can I withdraw the RRSP amount? ( 1 2 )
Financial Planning 3711 8
Sticky: RRSP 101 (All RSP questions answered) ( 1 2 3 ... Last )
Tax benefits for Canadian Residents
Financial Planning 126956 122
Re: Question about RRSP ( 1 2 3 )
Financial Planning 4714 17
spouser RRSP verses Own RRSP
Financial Planning 1974 3
RRSP Mortgages ( 1 2 )
Real Estate & Mortgages 2724 9
Details about RRSP & Comparison with 401K plan
Accounting and Taxation 1536 1
Maximise RRSP contribution??? ( 1 2 )
Financial Planning 2391 8
Foreign Content in RRSP
Accounting and Taxation 1581 2
tax return 2008 & RRSP ( 1 2 3 )
Accounting and Taxation 5092 20
RRSP/Tax refund Question!!
General 2039 4
Unused RRSP ( 1 2 )
General 3450 7
RRSP/401K and Taxation
Accounting and Taxation 2229 1
RRSP withdraw without physical presence ( 1 2 )
Financial Planning 4748 10
RRSP Question.. Please Reply
Financial Planning 4475 6
RRSP question ( 1 2 3 )
Financial Planning 4092 17
Question about Tax Return
Accounting and Taxation 1311 2
Switching RRSP account from one bank to another
Financial Planning 2101 1
RRSP and FTHB
Real Estate & Mortgages 2036 3
can I have more then one RRSP account?
Accounting and Taxation 2175 2
Secure LOC - should i get it.
Financial Planning 1602 1
Spousal RRSP and HBP
Accounting and Taxation 1737 3
RRSP vs. TFSA: Which one will give optimum benefits and right for you?
Accounting and Taxation 1293 4
RRSP withdrawal staying in Canada ( 1 2 )
Financial Planning 5805 7
 


Share:
















Advertise Contact Us Privacy Policy and Terms of Usage FAQ
Canadian Desi
© 2001 Marg eSolutions


Site designed, developed and maintained by Marg eSolutions Inc.