As RRSP deadline approaches this coming March, it’s time to take a look not only at maximizing the contributions you are making to your Retired Registered Savings Plan (RRSP), but at maximizing the potential of those funds once they are in place.
Within an RRSP there are several options as to how those RRSP funds can be allocated into an investment vehicle that will grow tax-free. RRSP funds can be attributed to, or to a combination of, mutual funds, guaranteed investment certificates, bonds, stocks, deposit accounts or segregated funds.
RRSP contributions are annual tax deferrals, or funds that you can deduct from your annual income and not pay tax on the year of contribution. RRSP funds are only taxed upon receipt, which according to Canadian regulations must occur by the RRSP owner’s 71st year. It is possible, however, to continue making RRSP contributions toward the RRSP of your spouse or common law partner after the age of 71, so long as they are not yet that age.
Segregated funds are one of the RRSP eligible investment options that will help you and your family to save on tax and other fees. Should you pass away, your segregated funds investment will be directly attributed to your named beneficiary, with no probate and no need to pay the administration fees of an executor or lawyer.
Though segregated funds are subject to market fluctuations, as are mutual funds, stocks, bonds and a host of other investment options outside of guaranteed investments, segregated funds do provide guarantees that mutual funds, stocks and bonds cannot.
Segregated funds offer death guarantee and maturity guarantee, in addition to insurance protection and probate protection.
As time consuming as the holidays are, find a moment before March 1, 2011, to examine what your RRSP dollars are doing for you. Segregated funds are one of many RRSP eligible options. Creating an RRSP portfolio that combines several investment options, and strategizes minimal taxation upon receipt, is a good way to make the most out of your retirement savings dollars.