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RRSP income splitting is a highly effective income tax and retirement saving strategy. Sometimes, a spousal RRSP is set up to better split income during retirement. Better split meaning improved tax treatment for each at retirement with the added bonus of improved current tax rates for the higher income earner. The higher income spouse simply makes a contribution to the other’s RRSP and claims the tax deduction. Now, with the investment becoming property of the other spouse, it is withdrawn in the future from the spousal RRSP at the lower income spouse’s tax rate. |
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Annuities are contracts between the purchaser and an insurance company, under which the purchaser makes a lump-sum payment and the insurer agrees to make periodic payments beginning on a fixed date. The payment amount is determined using payment frequency, the original investment, the type of annuity option and the age/sex of the annuitant/beneficiary. |
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RRSPs are a savings trust account that is registered with the Canada Revenue Agency as a vehicle to be used for securing some of the financial needs of retirement. No one is obligated to participate in a Registered Retirement Savings Plan but, as an incentive to do so, the Canada Revenue Agency offers very attractive income tax advantages to those income earners who do. There are some legal restrictions and guidelines which must be adhered to and numerous investment options such as stocks, bonds, Guaranteed Investment Certificates, mutual funds and equity backed mortgage funds that qualify for use. |
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Group RRSPs are simply a Registered Retirement Savings Plan where contributions are made on a regular basis by payroll or source deductions at a place of employment. The main difference from a self-directed RRSP and great advantage of participating in a group is contributions are made using before tax dollars; more on that shortly. Not all employers offer group RRSPs but this is a “perk” rapidly gaining in momentum. Unlike costly benefits packages, group administered Registered Retirement Savings Plans are an added service to employees that cost the employer nothing more than a minor bookkeeping entry to offer. All the employer has to do is make the deduction and submit it to the chosen independent investment manager/administrator who deposits the amount into the individual account and tracks deposit accumulations. |
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Although we all plan with the best of intentions, lurking in the back of most Canadians minds is that nagging doubt: Will I outlive my resources? |
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