Reasons to look into RRSPs
Do RRSPs have you scratching your head? Don't worry: You're not alone. Although 68 per cent of Canadians have a Registered Retirement Saving Plan (RRSP), that leaves nearly one-third of Canadian without. Some non-RRSPers choose to plan for retirement in other ways (primarily through employer-sponsored pensions) and others are financially savvy types managing their investments using other vehicles.
But there's also another group who aren't buying in because they think they can't afford it, or they simply have no idea how to get started. If you're in that group, this article is for you.
Why you need an RRSP
Whether you're financially savvy or not – but especially if you're not – RRSPs are a fantastic way to save for retirement. Think of an RRSP account as a lockbox for your savings, only better. Here's why.
• Contributions are tax deductable, bringing down your gross income for income tax purposes.
• Your RRSP is a tax shelter. You don't pay tax on your investment income (until it's withdrawn), meaning the overall value grows much faster.
• You won't be taxed on your RRSP until you make withdrawals, presumably during retirement. It will be taxed as income – most likely at a lower rate since you'll be earning less then as compared to now, your peak earning years.
