What is a group RRSP?
A collection of individual plan member RRSPs administered together. It has no legislative requirement for plan sponsors to contribute, but you do have the option.
A group RRSP helps plan members:
- Save more of their money for retirement —contributions are tax deductible and investment earning are tax-sheltered until withdrawal
- Choose investments to help save for retirement no matter what their investment knowledge or interest level—from simple to customized solutions
- Gain access to their funds to buy a first home (Home Buyers’ Plan) or for education (Lifelong Learning Plan)
- Conveniently contribute through payroll deductions and save tax immediately
- Build their retirement savings by matching their contributions
What are the tax-benefits of an RRSP?
- Tax-deductible contributions: commonly thought of as a way to get tax-refunds. These are a mainstay of RRSPs and part of the reason why they’re so popular. When you make a deposit into your RRSP, the amount comes off your taxable income for the year, and you could receive money back from the government at tax time.
- Example, if you earned $65,000 last year and you contributed $7,000 to your RRSP, you would only pay taxes as if you earned $58,000. This can result in a much-appreciated tax return at the end of the tax season.
- Tax-sheltered earnings: the investments in your RRSP grow tax-free. So you benefit from years of compound growth without having the tax-man reaching in while it’s in the account. However, when you retire you will have to pay taxes on the money you withdraw.
- Tax deferral: When you’re retired you could be earning little to no income, so when you withdraw money from your RRSPs, they will typically be taxed in a lower tax bracket than they would’ve been in your working years.
CLB Group / Honest Advice
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What to know about RRSP contributions
Because of the tax benefits, the government limits the amount you can put into your RRSP. You can deposit 18% of your earned income from the previous year (up to a maximum of $27,830 for 2021).
Any leftover room from previous years will carry over indefinitely until you use it