Introduction to RSPs
What is a Retirement Savings Plan?
A Retirement Savings Plan (RSP) is an investment account designed primarily for saving toward your retirement years. As a Canadian government regulated program, RSPs have special tax benefits. Your annual RSP contribution can greatly reduce the amount of income tax you pay in that year and the money you put away can have years of tax-deferred growth potential. You only pay tax on the amounts you withdraw. RSPs are available through chartered banks, trust companies and other selected financial institutions.
You should consider an RSP if:
- You want to supplement your retirement income so that you can maintain your lifestyle after you retire
- You want to reduce your income tax this year
- You want to earn tax-deferred investment income on your savings
- You anticipate fluctuations in your income because of maternity leave, a return to school or a career change
(Making withdrawals from an RSP in years when you have little or no earned income can help equalize your income and you could pay less income tax overall)
RSPs can also help you to buy a first home or pursue your education.
The Importance of Saving for Retirement
It pays to plan for your future
At TD Canada Trust, we're committed to offering you a wide range of RSP accounts and investments that can be tailored to your retirement financial needs. Our RSP specialists have put together this site to help maximize your savings and assist you in choosing the right RSP for your personal goals.
Four Important Reasons for an RSP at TD Canada Trust
- An RSP at TD Canada Trust is a smart way to invest
Today, more than ever, you must save wisely to ensure a worry-free future for you and your family. Just about anyone can open and contribute to an RSP. If you pay income tax; are employed, self-employed, receive net rental income, or maintenance and alimony payments; and are 71 years of age or younger, you can build a potentially larger retirement income and pay less tax now by contributing regularly to an RSP at TD Canada Trust. In fact, a registered retirement savings plan at TD Canada Trust could make the difference between "just getting by" and having the financial resources you need for a comfortable, fulfilling retirement.
Tax-deductible contributions, tax-deferred income and the income-splitting opportunities in a spousal plan are the three main reasons it pays to invest in a registered retirement savings plan at TD Canada Trust instead of a non-registered plan or many other investments.
And when the time comes for you to retire and convert your RSPs, whether at age 71 or earlier, you can continue to have your investments work for you on a tax-deferred basis by converting them to a form of retirement income.
- The money you invest is tax-deductible
Every eligible dollar you contribute to an RSP at TD Canada Trust reduces your taxable income by one dollar in the year you contribute. That means you can cut your tax bill dramatically. For example, if your marginal tax rate is 40% and you contribute $2,500 to your RSP at TD Canada Trust, your taxable income will be reduced by $2,500 for a tax saving of approximately $1,000.
- The income earned is tax-deferred
The income earned by your RSP at TD Canada Trust is tax-deferred for the entire life of your plan. You don't pay taxes on income earned in an RSP until you withdraw the funds. That's why your RSP savings can grow so much faster.
- RSP savings at TD Canada Trust are readily accessible
The money in a TD Canada Trust Daily Interest Savings Account RSP is just as accessible as it would be in a similar, but non-registered, investment so you can take advantage of other investment opportunities as they arise.
In addition, you could withdraw funds from a TD Canada Trust Daily Interest Savings Account RSP in an emergency and pay the applicable withholding tax. It is generally recommended that other sources of income and non-registered accounts be used first in such a situation, as an RSP is designed primarily for retirement savings.
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