Retirement is something that everyone has to think about at one point of their lives. However, many fail to realize what is needed in order to retire and live comfortably. Many people do not even realize that the government only provides a small percentage of an individual's retirement income. That percentage is usually just about 30 percent. If an individual is fortunate enough to have a pension plan, another 30 percent is provided. However, most people have to come up with about 70 percent of their own retirement income. This is usually from their long and short term investments. This is why it is so important to understand how the registered retirement savings plan (RRSP) really works.
The first thing to know is that contributing throughout the year to the RRSP will reduce the amount of income tax that is taken from the employee's annual salary. This can be accomplished by contributing to the RRSP through payroll deduction. By doing this, the individual pays less in income tax during year and usually will not overpay taxes.
Another important detail to know about the RRSP is knowing when to make contributions. RRSP contributions can be made on the first day of any year. Many people do not know that. Some wait until February or March to make their contributions because they believe that have to know what their limit is.
Unfortunately, many people do not realize that this is not how the system works. When a contribution is made that actually exceeds the yearly limit, the fund will be returned to the individual. It is also important to know that the money does not have to be returned. It can be used as part of a contribution for a future year.
Knowing what the eligible investments options for a RRSP is also very important. There are many different options. These would include shares on the stock exchange, government and corporate bonds, and investment certificates. People can also invest their RRSP funds into Canadian based mutual funds. They just have to meet government guidelines.
The last thing to know is that when it comes to couples, a person can contribute directly to their husband or wife's RRSP. They can do this as long as the couple does not exceed the annual contribution limit. When the owner of the RRSP reaches retirement age and has to convert the RRSP into a maturity option, many people do not know that the RRSP can be put in the younger spouse's name, but it can.
Please think about the above details when considering contributing to a registered retirement savings plan. It is necessary in order to be able to make smart investment choices. No matter the age, it is never too soon to think about the future. If there is to be a comfortable and enjoyable retirement, the time to start planning is now.
The first thing to know is that contributing throughout the year to the RRSP will reduce the amount of income tax that is taken from the employee's annual salary. This can be accomplished by contributing to the RRSP through payroll deduction. By doing this, the individual pays less in income tax during year and usually will not overpay taxes.
Another important detail to know about the RRSP is knowing when to make contributions. RRSP contributions can be made on the first day of any year. Many people do not know that. Some wait until February or March to make their contributions because they believe that have to know what their limit is.
Unfortunately, many people do not realize that this is not how the system works. When a contribution is made that actually exceeds the yearly limit, the fund will be returned to the individual. It is also important to know that the money does not have to be returned. It can be used as part of a contribution for a future year.
Knowing what the eligible investments options for a RRSP is also very important. There are many different options. These would include shares on the stock exchange, government and corporate bonds, and investment certificates. People can also invest their RRSP funds into Canadian based mutual funds. They just have to meet government guidelines.
The last thing to know is that when it comes to couples, a person can contribute directly to their husband or wife's RRSP. They can do this as long as the couple does not exceed the annual contribution limit. When the owner of the RRSP reaches retirement age and has to convert the RRSP into a maturity option, many people do not know that the RRSP can be put in the younger spouse's name, but it can.
Please think about the above details when considering contributing to a registered retirement savings plan. It is necessary in order to be able to make smart investment choices. No matter the age, it is never too soon to think about the future. If there is to be a comfortable and enjoyable retirement, the time to start planning is now.
No comments:
Post a Comment