"The question isn't at what age I want to retire, it's at what income." –George Foreman
Many people willingly go for retirement to enjoy and live freely. You can do the same through a retirement account. The selection of a retirement account matters a lot. We will help you choose the most suitable retirement account that will support you to live a stress-free life after retirement.
What is a Retirement Account?
A retirement account is a project through which an individual can invest and save their money for retirement. You can create a retirement account of your choice at a young age and can invest the money. There are different types of retirement accounts. Each has its own rules, salary requirements, and taxes. We will discuss every nitty-gritty detail of these accounts.
Registered Retirement Savings Plan (RRSP)
In this retirement account, you or your spouse or any other common-law partner can invest in RRSP within a specific limit. For Registered Retirement Savings Plan, the annual contribution limit is almost 18% of a worker's pay.
- RRSP permits you to withdraw money anytime.
- Enables you to invest money in various investments such as ETFs, mutual funds, bonds.
- RRSP reduces your combined tax burden.
- Any income you earn in this retirement account is exempt from tax.
- Helpful to pay for your education and building of new home.
Pooled Registered Pension Plan (PRPP)
It is a new type of retirement plan that functions similar to the Registered Retirement Savings Plan. Due to lower administration costs, people get attracted to this saving program. Self-employed individuals can also apply for this program.
- Low management and administraion fees.
- Encourages the employee participation.
- It is easily transferable from one place to another.
- Simple to set up and easy to maintain.
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Tax-Free Saving Account (TFSA)
FSA is a saving account in which tax doesn't apply to capital gains, contributions and dividends. It is applicable for all individuals over 18 years old. A tax-Free Saving Account can keep mutual funds, securities, and cash as well.
- There are no penalties for withdrawals.
- TFSA savings can be taken out anytime.
- No upper age limit on contributions.
- Income or capital gains earned in TFSA remain tax-free for lifetime.
Which retirement account is suitable for me?
While deciding for an optimal retirement account, you must know how Registered Retirement Saving Plans, Pooled Registered Pensions plans, and Tax-Free Saving Accounts are taxed. And how much you can contribute to a specific retirement account. You can choose more than one account, such as RRSP and TFSA, and even have a pension plan account. The biggest advantage of holding multiple accounts is that you can maximize your savings and build your dream home.
"Don't simply retire from something; have something to retire to." -Harry Emerson Fosdick
Let's wrap up our discussion!
How do you picture spending time in retirement? You might be thinking of Monday, when you are sitting at home, retired. Retirement doesn't relate with at what age you want to retire, it simply means at what income you retire. To come up with a retirement plan, you need a strategy to save and invest your money. For this purpose, we are available 24/7 to guide you regarding the three retirement accounts.