It’s never too soon to start saving for your retirement. More and more people are retiring early. By starting sooner rather than later you too could be on the golf greens or traveling the world at 55.
Registered Retirement Savings Plan - RRSP
Contributions made to a Registered Retirement Savings Plan (RRSP) are tax sheltered, meaning you won’t be taxed until the money is withdrawn (usually at retirement). Earnings on your investment are also non-taxable until withdrawal. You can also invest your retirement money in a variety of ways:
Registered Line of Credit
Sometimes it can be difficult to come up with extra cash at tax time for an RRSP contribution that could save you money. If you want to take advantage of unused RRSP contribution room, consider borrowing the funds with our RRSP Line of Credit. Over the long run the interest earned on your investments and money saved on your taxes can outweigh the cost of having borrowed the funds.
- Interest is calculated on the daily closing balance and charged at month end
- The interest rate follows prime for members in good standing
- There are no service fees on this account
- Funds can be transferred from your RRSP line of credit to your RRSP GIC through Cambrian Online, Touchtone or at any branch
- Cheques are not available as funds can only be used to transfer into any RRSP product offered at Cambrian
- Credit limits are available from $500 to $20,000
- Funds are expected to be repaid within a year
- Life and disability insurance available
Registered Retirement Income Fund - RRIF
Many Canadians know all about RRSPs, but RRSPs are only applicable until retirement, or age 71. That’s when the RRIF, or Registered Retirement Income Fund, comes into play. While there are various ways you can choose to withdraw funds from your RRSP, the RRIF is one of the favourite ways because it gives you more control over how the funds are withdrawn and consequently, how you’re taxed.
The RRIF behaves a lot like an RRSP – the money in a RRIF can still earn interest, except that you withdraw payments from it instead of contributing to it. You can set up monthly, quarterly, annual or even lump sum payments into your chequing account. You can take the minimum amount required by the government, or you can elect to take a specified amount within a year. We can also work with you to determine over what time period you would like the money to last – 10 years or 20 years and allot the payments to last for that duration.
While most people choose to take larger payments out of their RRIF when they retire at 60 or 65, if you haven’t started to take payments by age 71 it’s time to start. At age 71 Canadians who have RRSPs are required by the government to start removing a minimum payment each year. Your minimum amount depends upon your (or your spouse’s) age and the amount of your RRIF. Our expert Financial Advisors at Cambrian can help you determine your minimum payments.
Funds in a RRIF are tax sheltered; they’ll only be taxed when the funds are withdrawn from the plan. Since the funds are typically withdrawn when you retire, and your yearly income is likely much less than when the money was originally earned, you will probably pay a lower tax rate on the money.
If you’re taking more than your minimum payment from your RRIF you will find that Cambrian has taken a withholding tax from the payment as this is a government requirement. This only happens when you take more than the minimum payment required. Remember, though, that all funds withdrawn from the RRIF, on top of your pension and other income, are taxable income. Often members find that not enough withholding tax has been taken and end up owing at tax time. To avoid this you can ask Cambrian to increase the amount of tax withheld from your RRIF payments.
If you’re the kind of person who envisions a simpler life when you retire – a time for family, friends and travel, consider cutting down on your paper work. Since every RRIF requires a separate set of calculations to determine minimum payments, many people choose to consolidate their investments. In many cases, investments can be combined and re-aligned to maximize earnings while withdrawing funds. Consider getting a free investment evaluation of your retirement funds by one of our Advisors.
Our team of Investment Specialists will help you to draw up a retirement plan that suits your unique situation. Whether you invest only in RRSP Savings or GICs or you want to invest in mutual funds or individual stocks and bonds, Cambrian can provide the products backed by professional advice from our specialists.
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