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Types of RRSPs

Types of RRSPs

There are four types of RRSPs:

  • Individual RRSP
  • Spousal RRSP
  • Group RRSP
  • Self-directed RRSP

REER individuel

Individual RRSP

Retirement plan registered in the name of the contributor. The investments and their related tax advantages belong to the contributor.

Consult the Notice of Assessment Canada Revenue Agency (CRA) sends you every year to find out the maximum amount you can deduct in your tax return.

  • No minimum age to contribute.
  • Possible over-contribution of $2,000 as of 18 years of age.

Spousal RRSP

Plan registered in your spouse’s name and to which you are contributing. As the contributor, you qualify for a tax deduction, but the RRSP investment belongs to your spouse.

The total amount contributed to your RRSP and to your spouse’s RRSP should not exceed the total deduction to which you are allowed.

If your spouse withdraws from his or her RRSP in the first 3 years following the deposit, the amount withdrawn will be added to your taxable income of that same year. After that 3-year period, your spouse will be taxed on any amount withdrawn from his or her RRSP.

  • Advantageous if your spouse’s retirement income is expected to be lower than yours.
  • Minimizes the couple’s tax exposure.
  • Contributions can be made until your spouse reaches 71 years of age.

Group RRSP

Regular deposit savings plan that allows employees of a company to build capital for retirement through regular salary deductions.

A group RRSP is considered to be a collection of individual RRSPs, since an individual contract is registered for each participating employee. Certain conditions regarding eligibility and funds withdrawal apply.

If you have a group RRSP and an individual RRSP, the total amount contributed should not exceed the maximum amount indicated in your Notice of Assessment sent by the CRA (Canada Revenue Agency).

This savings method requires your employer first be registered for the Group RRSP service offer.

  • Optional: you choose whether or not you participate.
  • You determine the amount and choose the type of investment that’s best suited for you.
  • Immediate tax savings since your contributions are deducted from your taxable income right away.

Talk to your employer about it!

Self-directed RRSP

An RRSP is self-directed if you establish and manage your securities portfolio yourself, or with the help of a broker.

For those who wish to invest their RRSP contributions in shares, not in equity funds.

Because of the administrative service charges, if the investments you choose are term savings or investment funds exclusively, perhaps the self-directed RRSP is not the best solution for you.

When a self-directed RRSP acquires or has non-eligible investments, you could be subject to a special 1% tax calculated at the end of each month on the market value of those non-eligible investments.

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