INVESTMENTS

RRSP / Spousal RRSPs

A Registered Retirement Savings Plan (RRSP) or Spousal RRSP is a registered account designated for retirement savings. RRSPs are available to investors under the age of 71. When the owner of an RRSP reaches the age of 71, the RRSP must be closed. Many investors then choose to transfer their RRSP assets to an RRIF (Registered Retirement Income Fund) or a spousal RRIF.

LRSP (Locked-in Retirement Savings Plan) Account or LIRA (Locked-in Retirement Account)

If you leave an employer before you have reached retirement age, you may have to transfer the assets in your employer-sponsored Group Retirement Savings Plan (GRSP) or pension plan to a Locked-in Retirement Savings Plan. Depending on the applicable provincial pension legislation, this plan may be called an LRSP or a LIRA. Until you reach retirement age (as specified by your original pension plan), you are not permitted to draw on these funds. If you wish to receive income from the plan, you may be eligible to transfer the assets to another acceptable locked-in vehicle that can pay out income, such as an LIF (Life Income Fund) or an LRIF (Locked-in Retirement Income Fund). In any case, when you reach the age of 71, you must transfer the assets from your LRSP or LIRA to a LIF or LRIF. RRIF (Registered Retirement Income Fund)

Individuals who hold RRSPs, Spousal RRSPs and Group RRSPs are required by law to close these plans no later than the last day of the year in which they turn 71. Many individuals choose to transfer these RRSP assets to a RRIF or Spousal RRIF.

The RRIF pays out a prescribed mandatory minimum payment each year, but there is no maximum annual withdrawal limit. Withdrawals from a RRIF over the prescribed minimum amount are subject to withholding taxes imposed by Canada Revenue Agency (CRA). Learn more.

The difference between the RRIF and the LIF/LRIF is that the RRIF is used for transferring individual RRSP assets and the LRIF/LIF is used for transferring GRSP or other employer sponsored pension assets. These assets may have been held in an LRSP or LIRA before being transferred.

Both the LIF and the LRIF require a prescribed mandatory minimum income withdrawal and an optional maximum income withdrawal each year. Conversion to an annuity is not mandatory for an LRIF.

You retain control over how your LRIF/LIF is invested, subject to specific restrictions under the Income Tax Act.

Individuals aged 18 and older can contribute up to $5,500 every year to a Tax-Free Savings Account (TFSA). The current maximum space in a TFSA allowed is $63,500 per individual assuming they have been 18 and over since the beginning of the program.

With the ever-increasing cost of education, saving is one way to ensure your children realize their full potential. A registered Education Savings Plan (RESP) is a great beginning.

Contributions earn investment income on a tax-sheltered basis, and for beneficiaries younger than 18 years old, contributions can be eligible for up to $500 per year in federal government Canada Education Savings Grants.

An RESP is called an ESP (Education Savings Plan) until it is registered with Canada Revenue Agency (CRA).