Why pay now when you can pay later? #rrspseason is coming to an end.
RRSPs are like vegetables – really good for you, but also not a chocolate bar.
We like to think of RRSP’s as vegetables. Yeah, we don’t really want to eat them, but we know the payoff is worth it. And if you don’t eat your veggies now, you’ll definitely be eating them in retirement!
So how do RRSPs actually work (because we know they’re not actually vegetables)?
During your earning years your personal income will most likely be higher than in retirement. As you pay off your debts and get closer to the golden number, your bills will become less meaning that you won’t require as much income to get by.
There are tax benefits to contributing to your RRSP’s that will benefit you more now and also create a nice nest egg for when you retire. It’s basically like you’re saving to pay yourself in retirement (your RRSP turns into a RIF at age 71 and basically becomes a retirement paycheck).
How does the tax break for RRSP contributions actually work? By contributing to your RRSP now, you are postponing the taxes owned on that income. You can pay the tax on this income in retirement, after prime earning years.
Just to review:
RRSPs are good for you in two ways!
- RRSP’s lower the amount of taxes you pay by postponing payment until retirement when your tax bracket will most likely be lower; and
- At age 71 your RRSP converts into a RIF (retirement income fund) and provides you with a retirement income so that you can do the things you love (like eating ALL the chocolate).
How long do you have to make a contribution to your RRSPs for the 2016 tax year? March 1st 2017 is the 90 day cut off in order to claim the contribution on last year’s taxes.
So, eat your veggies now so you can have your chocolate later – it will be worth it in more ways than one.
#rrsps #retirementsavings #retirementincomespecialists #taxeseason #governmentofcanada #registeredproducts #financialplanners
|Written by Cori Ramsay, BA – Communications Officer|
|Contributor: Catherine Simon – Assistant Branch Manager, Town Centre Branch|