What is an RRSP?
Worby wealth Management a Trusted Regina Financial Consultant explains- What is an RRSP-?
As a Trusted Regina Financial Advisor, I can’t tell you how many times someone has asked me this question. Often they refer to an RRSP as something they ‘bought’ or something someone at the bank convinced them to buy.
The truth is that you can’t ‘buy’ an RRSP. It is a type of account. Just like your chequing or savings account is opened and it’s up to you to put money into it, so is this one.
And just like your chequing account has properties – you can write a cheque from it, use your debit card, etc – so an RRSP has properties.
The property most people like about an RRSP is that it gives you a tax break. But how? Essentially, once you open one, whatever amount you put in gets taken off your annual income and you get back the tax you paid that year on those funds.
Here’s an example:
Let’s say you made $90,000 one year and you paid $10,000 into your RRSP. Your effective income is $80,000 – but you have already paid tax on $90,000. So you end up getting the tax paid on that $10,000 back – probably in the neighbourhood of $3900.
But it is not an investment. Just an account. Investing is a whole other thing and our next blog will tackle that issue!
Chris Worby is a Trusted Regina based financial advisor and Wealth Management consultant servicing local Regina households and businesses since 2001.