A Registered Retirement Savings Plan (RRSP) is a government-approved plan through which you save money for your retirement years. Your RRSP investments are tax deductible, within limits, and the income earned is sheltered from taxation until withdrawn from your plan. You can have any number of retirement plans.
A Registered Retirement Income Fund (RRIF) is similar to an RRSP except that you cannot make contributions, and you are required to withdraw a minimum amount each year. Your RRSPs are converted into a RRIF account once you decide to draw income or at age 71. The RRIF earns money from investment, just as your RRSP did while you were contributing to it, and the RRIF makes payments to you according to a formula selected by you in accordance with CRA’s requirements.
A Registered Education Savings Plan (RESP) is a tax-deferred education savings vehicle by which the federal government allows a parent or grandparent to save money for a child’s post-secondary education.
A registered disability savings plan (RDSP) is a savings plan that is intended to help parents and others save for the long-term financial security of a person who is eligible for the Disability Tax Credit. Click here for more details
A Tax-Free Savings Account is a new way for residents of Canada to set money aside, tax-free, throughout their lifetimes. Contributions to a TFSA and the interest on money borrowed to invest in a TFSA are not tax deductible. The income generated in the TFSA is tax-free when withdrawn.
Individual Pension Plans (IPPs)
An IPP is a maximum defined benefit plan which provides contribution amounts in excess of the money purchase pension plan / RRSP contribution limit for people who satisfy certain age and earnings criteria. The plan has financial advantages over the RRSP-only alternative for high-income earners over certain age limit.
Pension plans can vary greatly in terms of their structure and the benefits they provide. The two most common types of pension plans are the defined benefit plan and the defined contribution (or money purchase) plan. Some employers offer a combination of the two types of plans – known as “hybrid” or plans.
Mutual Funds were introduced in Canada in 1932, providing investors with an easy way to diversify their savings in stocks, bonds and other securities without having to be experts. Today, half of all adult Canadians invest in mutual funds, and they do so for the very same reason they did when funds were introduced: convenience, security, affordability, diversification and expert management. Click here for more information.
GICs (Guaranteed Investment Certificate) are sold by banks, credit unions and trust companies. The financial institution promises to pay interest and repay principal, and this promise is backed by the bank’s financial reserves. Interest is generally quoted at an annual rate, although it may be credited to the account more frequently.
An annuity is a financial product that you buy from a life insurer who, in turn, pays you a regular income for a fixed period, or for the rest of your life. Annuities are ideal for transforming a lump sum payment into a dependable income stream. Annuities can provide stable and secure income payments for life and there is not need to manage investments.
Segregated funds are an insurance product with investment features, they are the insurance industry’s version of mutual funds. They hold investors’ pooled money, which the manager of the fund invests in stocks, bonds or other assets, depending on the fund’s investment objectives. While similar to mutual funds in many ways, segregated funds offer unique advantages and guarantees that mutual funds do not.
A Group RRSP is simply a collection of individual RRSP’s where employees make contributions through regular payroll deductions on a pre-tax basis. Upon completing the application form and deciding how much you want to contribute, you employer deducts that amount from your pay in pre-tax dollars as permitted by Revenue Canada and forwards it to the financial organization selected by your employer as the administrator for the group plan. Your contribution is then deposited into your own personal RRSP at the financial organization and invested as you specify.