Registered Retirement Savings Plans are individual savings programs made specifically for when you plan to leave your full time job. It is important to know that all Canadian residents (Natural or through permanent residency) have the right to a pension. In Canada there are three types of pensions: Public pension paid to a person who reaches 65 years of age. Pension contributions, made over time, in the amount of 5.4% of earnings. Pension from special pension funds, referred to as RRSPs. RRSPs are a popular type of personal savings, that people set aside for retirement. Transfers to retirement funds are tax-deductible and anything earned through investments are not taxed at all. Taxes are only charged when you withdraw from the plan. You are eligible to open an RRSP through insurance companies, banks, and trust companies (to name a few). Pension plans can be set up for both partners, in a marriage, and you are allowed to contribute up to 18 % of your revenue from the previous year. If your employer also contributes money to your group program, the individual limit will be reduced. If you are not able to invest money in retirement plan this year, it is possible to do so within 60 days of the following year, i.e. until 28 February. Pension plans are great because they guarantee income after retirement.


According to statistics, if a person at the age of 21 could contribute $ 2,500 per year, until the age of 65, they will become a millionaire. While it’s definitely not easy to set aside $2500 per year, when you’re that young or don’t have a steady job it is good to know that an investment now can lead to great financial stability in the future. Pension plan laws were adopted in 1965, in Canada, to make sure that everyone over the age of 18 has access to a retirement fund. The only condition is that contributions to the fund must be listed with all employment information. In 2014 the fixed percentage of mandatory contributions to the pension fund was set as 4.95 %. The main disadvantage of investing in a pension plan is that any amount you take from the fund is taxable. You cannot borrow money from your pension plan, before retirement, except to purchase your first property – and the total amount you can withdraw is set at $24,000 (this amount must be paid back to the plan over the next 15 years). It is a very good idea to invest a small amount of money regularly in your fund. If you want to reduce your taxes, you should invest an amount of money that is more than your own income. Unused funds from previous years can also be invested. Pension plans are also used when the breadwinner in the family dies or loses the family’s primary source of income. People who lose their jobs, for example, receive disability benefits. RRSPs also cover children in case of the death of their parent(s). RRSPs are offered through banks, insurance companies, and credit groups. If you close your plan at the age of 71 years you can transfer the remaining amount into another account, that you will have access to without limitations. Please contact me if you have any questions!