As I began writing this 3rd installment of my month-long RRSP bloggage, my wise and all-seeing wife (blog plug for Adventuresofmamakujo.com!) pointed out that I made a very large assumption when I began writing these posts. I assumed that my readers actually knew what an RRSP was and the basics of how it works! The reality is that most people simply don’t have the time or resources to learn about this stuff. They rely instead on professionals in specific fields to act on their behalf…and hopefully in their best interest.
So with that in mind, I present to you my awesome reader(s) (hi Mom)….a Beginner’s Guide to RRSPs!
Registered Retirement Savings Plans are basically a gift from both our Canadian and (insert your Province here) governments as an incentive for people to save money for their retirements. For every $1 you contribute to your RRSP, $1 gets taken off your taxable income for the year in which that contribution is made. The more you contribute in a year, the less tax you’ll pay. There are limits to how much you can put into your RRSP in a year and there’s more to it than simply “more contribution = less tax” but those are the basics.
These contributions accumulate in the account and grow tax-free until they are withdrawn or transferred out, ideally at the ripe young age of 71 years (the last year you’re allowed contributing). The fancy shmancy word people like to throw around is “tax shelter“, meaning your money is shielded from taxation in the RRSP. Tax shelter really is a great phrase and I highly recommend using it completely out of context at parties to impress people you just met.
You might have heard a lot of chatter about how you CAN’T pull money out of an RRSP once you contribute. You may have heard that your Mother or Father or Grandparent will yell at you if you withdraw money from your RRSP. While this is likely true, the fact of the matter is that you can withdraw money from your RRSP but if you do so, it means you didn’t plan your finances properly. It means the contribution “room” that your governments gifted to you has now been wasted….a real shame. Shame shame shame. Unlike your parents though, I forgive you. But in exchange for this forgiveness, I suggest you schedule a meeting (with me) so that we can plan your finances better for the next round of life, making sure to maximize those tax shelters since they represent nothing less than more cash in your pocket. Now please bear with me as I exploit my amazingly adorable daughter for more blog reads:
The Funny Accountant/Tax Shelter Expert
Don’t forget to follow me on Twitter if you like what you read! And as always, if you have tax questions, need advice on your personal taxes, corporate taxes or anything else accounting or business related, please contact The Funny Accountant/President of MK & Associates by phone at (514) 833-1158 or by e-mail at firstname.lastname@example.org.
Also, for a witty and insightful read, check out the wifey’s blog. It’s funny and good.
And, last but not least, Anthony Housefather, our sitting Mayor here in Cote Saint-Luc, Quebec is running for the Liberal Party of Canada’s nomination in the Federal riding of Mont-Royal. In my opinion, he is clearly the best man for the job and it is my hope that others might have an interest in helping Anthony to achieve his goal of winning the Party’s nomination and making his way into the House of Commons as a Member of Parliament. If you live in the Mont Royal district and are interested in supporting Mayor Housefather’s campaign, please follow this link and sign up as a member of the Liberal Party (a $10 cost for the year). When the time comes, sometime later this year, you can then help nominate Anthony Housefather as Liberal candidate in our riding! Good luck Anthony!