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Answers:
What is an RSP?
Also commonly known as a Registered Retirement Savings Plan. It is a tax-sheltered
vehicle for investments that is registered with the Canada Revenue
Agency (CRA). The Federal Government created RSPs in the late 1950's to encourage
Canadians to save for their retirement.
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Do I need one?
Of course! An RSP not only helps you save for retirement, but also has positive
tax implications for the present. The money you contribute to your plan (as well
as the earnings you make on your investments) is only subject to tax upon
redemption.
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Who can invest in an RSP?
If you pay Canadian taxes, and have earned income in Canada you may have a registered
plan. Note that you can only have an RSP until the end of the year of your 71st
birthday.
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Is an RSP an investment?
No. An RSP is simply a plan that allows you to defer taxes on investment income
until (hopefully) a more favorable time in the future. There are single vendor RSPs,
as well as self-directed ones. Many different types of investments can be held in an
RSP, including stocks, bonds, mutual funds, and money market instruments. An RSP may
also be held at a wide array of financial institutions such as banks, brokerages,
and insurance companies.
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How do I get an RSP?
Qtrade Investor offers a wide array of registered plans. Opening one is as simple as opening
a regular trading account. Registered plans offered by Qtrade Investor are self-directed,
which means you are in charge of your own investment decisions. Please
click here to open your Qtrade
Investor RSP account now.
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What other types of registered plan accounts are there?
We also offer Registered Retirement Income Funds (RRIF), Spousal RSPs, Spousal RRIFs,
Locked-In RSPs, Locked-In RRIFs (LRIF), Locked-In RSPs, Life Income Funds (LIF), and
Registered Education Savings Plans (RESP).
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What is the contribution deadline?
Contributions for the past year must be made no later than 60 days past the end of
the year. This usually works out to be the last day in February. However if you
turn 71 in that year you will have to make your contribution before the end of
the previous year.
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When can I get my money?
An RSP plan holder may deregister the plan at any point. These deregistrations are
subject to taxation by the CCRA. Mandatory deregistration, however, begins in the
calendar year in which the plan holder turns 71.
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What happens when I turn 71?
At this point the plan holder has a number of options. The contents of the plan can
be withdrawn as a lump sum and subjected to appropriate taxation, they can be rolled
into an RRIF, or the proceeds can be used to purchase a life or fixed term annuity.
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What happens in the event of the death of a plan holder?
If a person passes away before deregistration of an RSP, the surviving spouse may
transfer the proceeds to his/her plan with no tax implications, as long as they are
the beneficiaries of the plan.
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What is foreign content?
Foreign content is a percentage of the entire book value of your registered plan
that is held in qualified foreign investments. If you have more than one RSP
account, then it will be a percentage of the total of all your accounts.
As of the 2005 Federal Budget, there is no longer a limit to the amount of foreign content
that can be held within a registered account.
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What is Book Value?
For an individual investor, book value is the amount originally invested plus any
interest or dividends earned that have been reinvested.
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Can I contribute investments to my RSP?
Yes. You can contribute many different investments. Common RSP investments are stock,
bonds, and mutual funds. The value of these for contribution limit purposes can be
chosen anywhere between the high and low prices of the day, or in some cases the
face value of the security.
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What is a Swap?
A swap involves an exchange of a security or cash from within your RSP, with a
security or cash of equal value from outside the plan. For example, if you have
$5000 of a certain stock in your regular account, you could swap that stock for
$5000 cash within your RSP. A swap is not a contribution, and usually involves
a small fee.
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What happens if I don't contribute this year?
Unused portions of your contribution limit may be carried forward indefinitely into
the future.
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Can I contribute more than my annual limit?
You are allowed a lifetime over-contribution of $2000. It can be used as deductions
in future years. A 1% monthly penalty tax will be applied to any amount over the
$2000 limit.
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When can I contribute funds to my RSP?
You can contribute funds any time during the year. Qtrade Investor has an
automatic monthly contribution system. There are also some people that like to leave
contributions until the very last minute. It's a personal choice as to when you
would like to deposit funds to your RSP.
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RSP BASICS