The growth of RRSP depends on time. The longer you invest your money with RRSP, the greater the opportunity it has to grow.
Here is an example,
Let us say you are 25 and you contribute $100/month to a RRSP that gives you an annual 6% return. By the time you are 65, you will get a return of nearly $197,000. That is the beauty of investing in RRSP systematically over a longer period of time.
The annual contribution limit is set by the Government of Canada. Your maximum allowable RRSP contribution for the current year is 18% of your previous year's earned income, minus any pension adjustments, up to the government maximum for the tax year.
When you turn 71, you must do the following:
a) Withdraw the funds from your RRSP; or
b) Transfer the funds directly into a plan that provides income — for example, a Registered Retirement Income Fund (RRIF); and/or
c) Use the funds to purchase an annuity that can provide you with regular income to draw on during retirement.
Contact your financial advisor for more information.
A TFSA is a tax-free savings account, which means it allows you to save money tax-free. When you withdraw, you will not be entitled to pay taxes. Unlike RRSP, contributions made to a tax-free savings account are not tax deductible.
Because it saves you money tax-free, a TFSA can be your best option for short term projects, like saving money for a new car or a trip. The RRSP, on the other hand, is more suited towards long-term savings.
It depends. People can contribute to a certain limit. You are allowed to invest up to 18% of your eligible income or according to the limit set by the government.
Contact a Trust Life financial advisor to know how much you should contribute based on your budget. Everyone has different savings goals as well as needs. If you haven’t opened a RRSP yet, it is high time you do.