Posted on: 11-01-05 17:52:49
I would really appreciate if someone can differenciate betweek RSP & RRSP ???
My compony deducts RSP contributions from my PayCheck regularly ?
Can i access that amount before I'm 65 ?
Should i make some contribution to RRSP as well, in addition to RSPs ?
HELP please explain ???
thanks
-jellyMan-
Quote:
Orginally posted by jellyman
I would really appreciate if someone can differenciate betweek RSP & RRSP ???
My compony deducts RSP contributions from my PayCheck regularly ?
Can i access that amount before I'm 65 ?
Should i make some contribution to RRSP as well, in addition to RSPs ?
HELP please explain ???
thanks
-jellyMan-
RSP and RRSP are generally one and the same thing. The full form is REGISTERED RETIREMENT SAVINGS PLAN and is referred to as RRSP. However, sometime people use short version as RSP which again is RETIREMENT SAVINGS PLAN. The plan is registered with CRA (CANADA REVENUE AGENCY) to enable you to get tax credit and all the investment in the plan grow tax sheltered but the withdrawals fromthe plan are subject to tax. The plan which is not registered with CRA is called Non Registered Plan and that does not get you any tax credits.
You can contribute only up to your 'contribution room' which is advised to you by CRA on your Notice of Assessement and there are penalties if you over contribute more than $2000. This contribution is calculated on your last years earned income. Hence you have to find out your contribution room and then check how much money your company has deducted from your salary and if they are also matching a portion of the same from their side and if any room is still left then you can contribute in to RRSP on your own. If you want to take advantage of this contribution for last year, then the contribution should be made by Feb 2005.
Generally these RRSP plans are forced savings for your retirement and you have to start withdraw them at that time, but in case of need you can withdraw money from there any time and it would be added to your income for that particular year. You can also withdraw money from your RRSP under Home Buyer Plan (first time home buyer subject to certain conditions, repayments later and amount limits) or for your continuing education under Life Long Learning Plan (again subject to some conditions) and if you withdraw money for these 2 purposes then you do not have to add that amount to your income. RRSP is a good tool for getting some extra meney for CRA for buying your first home (some conditions apply). RRSP are also used for income splitting and if you want to know more about the same you can PM me.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thank you for your reply, Pramod
but is there anything as locked or unlocled RSP ?
I was told the RSP i have with my current employer are locked,
as the employer also puts in a certain amount in addition to my contribution & i can only access that when i'm 65+
Please clarify the locled/unlocked part . . .
thanks again
Hi Jellyman,
The following link would give you answers for most of your questions
http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/glossary-e.html
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Quote:
Orginally posted by jellyman
Thank you for your reply, Pramod
but is there anything as locked or unlocled RSP ?
I was told the RSP i have with my current employer are locked,
as the employer also puts in a certain amount in addition to my contribution & i can only access that when i'm 65+
Please clarify the locled/unlocked part . . .
thanks again
Hi Jellyman,
I think you are referring to the employer-sponsored Registered Pension Plan (RPP).
The two most popular RPPs are the Defined Benefit Plan (DBP) and the Defined Contribution Plan (DCP). Both the employer and employee contribute to these plans.
In the DBP, the pension amount is defined and known in advance but contributions to the plan vary. The employer takes all the risk of maintaining the plan.
However, in the DCP, also known as the Money Purchase Plan, the contribution amount is known but the pension amount is not known in advance. The employee is responsible for investment decisions.
If an employee leaves the employment and the plan has vested, the plan money is generally transferred to a locked-in RRSP, also called LIRA. Under normal circumstances, the money in LIRA is not available to the plan-holder before the age of 55 (the age depends on the provincial rules). After this age, the plan-holder has the option to convert LIRA to Life Income Fund (LIF). The main advantage of this conversion is that now the plan-holder can withdraw money from LIF within minimum (compulsory) and maximum (optional) limits.
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Man's Best Friend 
Hi Pramod,
That was a really good explanation. Thanks it really gave me a good hold on RRSPs. But I have a question I just entered Canada as a landed imigrant last year and I was reading this article on the tax on the governemnt site.
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Quote from the T4055 document for New Immigrants
Deductions
Registered retirement savings plan contributions Generally, you cannot deduct contributions you made to a registered retirement savings plan (RRSP) in 2004 if this is the first year that you will be filing a tax return in Canada. However, if you filed a tax return in Canada for any tax year from 1991 to 2003, you may be able to claim a deduction for RRSP contributions in Canada for 2004. We base the maximum amount you can deduct on certain types of income you earned in earlier years.
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Now the question is if I have already put cash into the RRSP foir my self and my wife I wont be able to avail deductions on it.
Is there a way out to claim this deduction ??
Quote:
Orginally posted by smartalec
Hi Pramod,
That was a really good explanation. Thanks it really gave me a good hold on RRSPs. But I have a question I just entered Canada as a landed imigrant last year and I was reading this article on the tax on the governemnt site.
======================================
Quote from the T4055 document for New Immigrants
Deductions
Registered retirement savings plan contributions Generally, you cannot deduct contributions you made to a registered retirement savings plan (RRSP) in 2004 if this is the first year that you will be filing a tax return in Canada. However, if you filed a tax return in Canada for any tax year from 1991 to 2003, you may be able to claim a deduction for RRSP contributions in Canada for 2004. We base the maximum amount you can deduct on certain types of income you earned in earlier years.
====================================
Now the question is if I have already put cash into the RRSP foir my self and my wife I wont be able to avail deductions on it.
Is there a way out to claim this deduction ??
Unfortunately not.
As it is clear from their (CRA's) wbsite that you can not claim RRSP dedution if it is your first income tax return in Canada. However, you can contribute up to a maximum of $2000 in RRSP without any penalties and can claim deduction on the same in your 2005 tax return, again subject to the contribution room available.
Should you have any questions, you can call me or email me and I would be happy to advise you accordingly.
Good Luck
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
