what’s up with RRSPs?
February 20, 2017
There’s a lot a acronyms in the financial world and we get that they can be confusing. I mean what is an RRSP anyways? Sometimes that confusion can scare people away from saving, which makes us sad because saving is real important! To help you out, we’ve put together a short Q & A.
a Q & A about RRSPs
Q. What is an RRSP?
A. RRSP stands for a registered retirement savings plan. Basically it’s an account you can contribute to throughout the years to save for your retirement.
Q. What if I’m not even close to retiring, do I still need an RRSP?
A. YES! An RRSP may be used when you’re ready to kick up your feet and relax, but in order cash in on one, you need to start before it you’re ready to retire.
Q. What’s the benefit of an RRSP?
A. Each year you’re allowed to claim a certain amount of your RRSP contributions on your income tax claim (or carry them forward to the next year). AKA your RRSP is gonna save you money on your taxes!
Q. I want to buy a car / boat / motorcycle, can I use my RRSP?
A. Well, you can, but if you decide to take money out of your RRSP early you’ll have to pay taxes and / or fees on your withdrawal. An exception to this is if you’d like to use your RRSP as a loan towards your first house or education!
Q. Can I really use my RRSP towards a down payment for a house?
A. Yes you can! If you’re looking to buy your first home you can use up to $35,000 (or $70,000 per couple) of your RRSP as a loan towards your down payment. Keep in mind you need to pay it back within 15 years.
Q. When should I start an RRSP?
A. Saving early is always a good idea, but it is never too late to open one and start contributing (unless you’re retiring tomorrow, then it wouldn’t be a good time).
Q. How can I earn more interest on my RRSP?
A. You can lock your RRSP into a term to earn even more interest for your retirement days!
Ready for even more details? Check out our RRSP pages or come chat with one of our member service representatives at your Sunova branch.