RRSP Tips
#16: Transfer of unused Registered Education Savings Plan income
The subscriber (contributor) under a Registered Education Savings Plan can transfer up to $50,000 of accumulated income from an RESP to an RRSP in the name of the subscriber or their spouse. The following conditions must be met:
- The RESP must have been in existence for at least 10 years.
- All beneficiaries under the RESP must be at least 21 years of age and not eligible to receive education assistance payments.
- Only amounts transferred within the subscriber's RRSP deduction limit will avoid taxation.
There is a special 20% surtax on any excess accumulated income withdrawn by the subscriber.
#17: Who is eligible to contribute to RRSPs?
Anyone with "earned income" subject to Canadian taxation, including non-residents, may contribute to an RRSP.
You can make part or all of any RRSP contributions to a plan in your spouse's name. You, as the contributor, are still entitled to the tax deduction.
To maximize your long-term tax savings, RRSP contributions should always go into the name of the spouse who will otherwise have the lower income in retirement.
#18: Where can an individual get an RRSP?
RRSPs are available from banks, trust companies, credit unions, life insurance companies, investment dealers and mutual funds.
You can have any number of RRSPs. There are three basic types: deposit type plans, mutual funds, and self-directed plans.
Look for the plan that has the best potential return for the risk you are prepared to take.
Determine if there are any fees, and take them into account in comparing the anticipated annual growth.
A chartered accountant can advise you on the tax advantages of an RRSP and the type of plan most suitable for you.
#19 what is a self-directed RRSP and what are its advantages?
A self-directed RRSP allows you to make a wider variety of investments. The most common self-directed RRSP investments are: shares and debts of public corporations, B.C. and Canada Savings Bonds, mutual funds, and home mortgages.
There is usually an annual administration fee for a self-directed RRSP. Such fees are no longer tax deductible. You should have at least $15,000 in assets in a self-directed RRSP to make it worthwhile paying an average fee.
If you're looking for more control and flexibility over your RRSP investments, look into a self-directed RRSP.
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