Cyndy Batchelor, Financial Advisor
O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd.
Q: What is an RRSP?
A: An RRSP is a Registered Retirement Savings Plan. A deposit into an RRSP will reduce your taxable income for the year while allowing you to build your own personal “pension plan” for retirement.
Q: How much can I contribute to my RRSP?
A: Up to 18% of your income to a maximum of $27,830 for tax year 2020. However, if you did not max out your contributions in previous years you can catch up. Your Notice of Assessment will tell you your RRSP limit.
Q: Should I use a RRSP or a TFSA?
A: One of the differences between an RRSP and a TFSA (Tax Free Savings Account) is that a RRSP contribution gives you a tax break when you contribute. Where do you put your savings first? If you are just starting out and earning less, saving in a TFSA may be more prudent. Plus, when you retire the money you saved in your TFSA is not considered income – so it will not affect your taxes. As your income grows you can switch to a RRSP to take advantage of the tax break.
If you have more questions, please reach out to us!