Canadian Tax Planner - Registered Retirement Savings Plans (RRSPs) (November 2017)

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The proportion of Canadian taxpayers contributing to an RRSP has been steadily declining in recent years. For the 2015 tax year, 22.9% of Canadians reported having contributed to an RRSP, down from 29.1% in the year 2000. In addition, there has been a marked decline in the proportion of private-sector workers covered by a defined benefit pension plan, responsible in part for an overall drop in pension coverage. Although, at least part of the decline in the proportion of Canadians contributing to an RRSP is explained by the introduction of the TFSA as an alternative tax-sheltered savings vehicle.

A recent retirement survey conducted by HSBC, a large international bank, showed that nearly half of working-age Canadians are not saving for retirement. Further, according to the survey, twice as many Canadians are planning to help fund their retirement through downsizing or selling their home than the global average.  

It also appears that the average Canadian is more indebted than ever before. At the end of 2016, the ratio of household debt to disposable income rose to 167.25%, from around 100% in the year 2000. In other words, on average, Canadians owe $1.67 for every $1 of disposable income they earn. 

With this backdrop, many Canadians may not be saving enough to adequately provide for themselves in their old age. On the plus side, Registered Retirement Savings Plans (RRSPs) offer Canadians a tax advantaged means of saving for their retirement; providing individuals with a considerable degree of choice and flexibility over investment options and even special provisions for early withdrawal under the Home Buyers Plan and the Lifelong Learning Plan.

While investing in an RRSP is not the ideal solution for some, for many it presents an attractive choice for those hoping to ensure that they are financially secure in their retirement. In this edition of the Canadian Tax Planner we will discuss how RRSPs work, what happens when funds are withdrawn, as well as the types of investments that are permitted in an RRSP and the options available to a plan holder when their RRSP matures. 

More specifically, we will discuss:

PART 1: How an RRSP Works

PART 2: Withdrawing Funds From an RRSP

PART 3: What Investments Are Permitted in an RRSP?

PART 4: What Happens When an RRSP Matures?

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WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2017. Date of Issue – November 2017. This periodical is published six times per year in January, March, May, July, September and November.