Making withdrawals

Making RRSP withdrawals before you retire A quick look at the impact of dipping into your RRSP before retirement. You can take money out of your RRSP RRSP See Registered Retirement Savings Plan. + read full definition before you retire — for example, to cover an emergency situation.

Learn more about investment risks. The market value tells you what your investment is worth as at a certain date. Sorry we could not verify that email address. Generally, client-held accounts are for mutual funds and exempt products only; therefore, if an investor holds stocks and bonds along with mutual funds or exempt products, a Nominee or Intermediary account is most beneficial for ease of tracking all types of investments in one place.

How much you can contribute

A Registered Retirement Savings Plan (RRSP) is an account, registered with the federal government, that you use to save for retirement. Anyone who files an income tax return and has earned income can open and contribute to an RRSP, and RRSPs have special tax advantages.

Use this RRSP calculator to figure out how much you need to save for retirement. Interactive sample Fund Facts: The money goes to finance government programs and other costs. Effectively, your contributions are made with pre-tax dollars. That includes both your investment earnings and your contributions. How much you can contribute Anyone who files an income tax return and has earned income can open and contribute to an RRSP.

You can contribute the lower of: Prohibited investments — Examples: You must repay the loan, with interest, by a set date. Non-qualified investments — Examples: Understand the risks The value of your RRSP may go down as well as up, depending on the investments it holds. A trustee manages the assets until the beneficiary reaches legal age. You can redeem your fund units at any time. This can give them income and help pay your funeral and other final costs.

You must close your RRSP when you turn There are several life-cycle funds on the market that will automatically do this for you. Tina Di Vito, director of retirement strategies at BMO, also suggests that as you get closer to retirement you start building up a buffer. Is the money in my RRSP really tax-free? No, the government will get its pound of flesh later.

This is how it works: This way you pay less tax in total to the government. The other main benefit of RRSPs is that investments grow inside the plan tax-free. The goal for most people is to contribute enough so that when you retire, you can maintain the same lifestyle you enjoyed while you were working.

Each year, roughly two thirds of Canadians contribute nothing at all. I maxed out my RRSP contributions. Yes, contributions made in the first two months of the year can be declared for either tax year. When Canadians are building a retirement portfolio, what better benchmark to examine than our very own Canada Pension Plan? The CPP had an Given the current low interest rate environment, REITs may be considered by some as an alternative to bonds.

The low rates actually help REITs, since they typically use debt to help finance their purchases of residential, commercial and industrial real estate. The strong real estate price backdrop across the country has led to continued stock price appreciation. Real estate should make up part of a balanced investment portfolio.

RRSPs are no place to gamble with Peruvian mining stocks and other risky investments that could ruin your retirement plans. You should aim for a balanced portfolio containing a mix of equities and safer investments such as bonds and GICs. If you do enjoy taking a gamble on stocks, put them into your non-registered accounts. If the stock turns out to be a dud and you end up selling the shares, you can at least claim a tax deduction on the capital losses.

In an RRSP, no such deduction is allowed. I have a pension. For most people the answer is yes—although if you have a good pension at work, you can certainly contribute less to your RRSP than someone without one. If you have a private pension, then the amount you are allowed to contribute to your RRSP will be reduced, to reflect the fact that you are also contributing to your retirement income through your pension at work. But at age 71, you have to wind up your RRSP and start taking the money out.

You just sign a document and change the name of the account. What really changes is the rules: Your financial institution will send you a notice telling you the minimum amount you need to take out each year.

Most people decide to change the composition of their investments when they retire, as income and safety are now priorities, rather than growth. This can mean adding an annuity, which guarantees a set monthly payment for a set period of time often for life. Other options include bonds, dividend-paying stocks and even income trusts.

Which should I contribute to first: Financial planners have debated it for years, but from a pure dollars-and-cents perspective the correct answer is usually to pay your mortgage down first. Every time you make an extra mortgage payment you reduce the amount owed on the principal. Should I buy stocks, mutual funds or ETFs? It all comes down to what kind of investor you are. If you are disciplined, informed and willing to put in the time, you can do very well by buying individual stocks.

However, you need to stick to a proven strategy, such as value investing, and you should buy for the long run. But you should stick to an asset allocation that works for you, and keep your fees low. Investing in index funds or exchange-traded funds ETFs is a great way to invest for both beginners and the more experienced. Our Couch Potato Portfolio of ETFs can give you many of the benefits of mutual funds at a much lower cost, which means a higher return over the long run. Spousal RRSPs can save couples a lot of money, although they are less important than they used to be.

The idea is to equalize the incomes of the spouses as much as possible to reduce your tax bill. Still, spousal RRSPs are less popular than they used to be. The catch is you have to repay the full amount within 15 years. Once again, the money has to be repaid. That penalty will eventually be refunded if your income is low enough though see below.