| |
|
| |
What
is a Registered Education Savings Plan (RESP)? |
| |
How
much can you contribute? |
| |
What
happens when your money is withdrawn? |
| |
|
| |
 |
| |
What
is RRSP ? |
| |
Do
I need an RSP? |
|
Can
I withdraw money from my RSP? |
| |
|
| |
 |
| |
|
| |
What
is a mutual fund? |
| |
What
are the benefits of investing in mutual funds? |
| |
How
much do I need to start? |
| |
Why
do people use mutual funds? |
| |
|
| |
|
| |
|
|
What is a Registered Education
Savings Plan (RESP)? |
| |
A Registered
Education Savings Plan (RESP) is a tax-deferred savings plan
that you open on behalf of a future post-secondary student.
Unlike an RRSP, RESP contributions
are not tax deductible; however, the income earned on RESP
contributions compounds on a tax-deferred basis. In addition,
contributions to an RESP qualify for a Canada Education
Savings Grant (CESG). This means that for every child age
17 and under, the government will contribute an additional
20% of your RESP contributions – up to a maximum grant of
$400 per year.
|
| |
|
|
How much can you contribute?
|
| |
You may contribute up to $4,000
per year per beneficiary (the child); RESP contributions may
be made for up to 21 years — to a lifetime maximum of $42,000
per beneficiary. An RESP terminates when all the funds have
been withdrawn or 25 years after the plan was opened, whichever
comes first. |
| |
|
|
What happens when your money
is withdrawn? |
| |
You may withdraw your RESP
contributions at any time, with no tax consequences — only
the accumulated income in the plan is taxable. When money
is eventually withdrawn from an RESP to pay for education-related
costs, the income is taxed in the hands of the beneficiary
(the student), not the contributor. If the student withdraws
the money over period of several years, the income should
attract little or no tax. |
| |
|
|
What is RRSP? |
| |
A registered
Retirement Savings Plan (RSP) is an investment account designed
primarily for saving toward your retirement years. As a retirement
savings vehicle, regulated by the Canadian government, RSPs
have special tax benefits. Your annual RSP contribution can
greatly reduce the amount of income tax you pay in that year,
and the money you put away can have years of tax-deferred
growth potential. You only pay tax on the amounts you withdraw.
RSPs are available through chartered banks, trust companies
and other financial institutions.
Contributions to an RSP can only be made
by individuals with "earned income" taxable in
Canada, which includes salaries, self-employment income,
maintenance and alimony payments, and net rental income
(but does not include income from pensions or investments).
Certain other types of income may be eligible -- consult
a tax advisor or Canada Revenue Agency (CRA).
CRA issues statements to individual taxpayers
with their "Notice of Assessment" informing them
of their RSP contribution limit for the following year.
|
| |
|
|
Do I need an RSP? |
| |
The
maximum annual pension a Canadian can currently get from the
Canada Pension Plan is just over $10,000.00 (if taken at age
65, as of 2006). Canada's senior population (65+) is expected
to increase dramatically in the future. You shouldn't rely
on government pension plans alone for your retirement income.
An RSP can help you maintain your standard of living when
you retire.
In addition to this, your taxable income
will be reduced each year by the amount of the eligible
contribution. So, the more you contribute, the less income
tax you'll pay in the year that you make the contribution.
|
| |
|
|
Can I withdraw money from
my RSP? |
| |
Although
an RSP is more effective as a long-term investment, you may
withdraw all or part of it at any time.* RSP withdrawals are
subject to tax and the terms of the investment you choose.
But the important part is that your money is available if
you need it. Withholding taxes apply on funds withdrawn from
an RSP except when funds are transferred from one RSP to another,
or when funds are transferred to a retirement income option
such as a Retirement Income Fund (RIF).
*Please note that withdrawal restrictions
apply to locked-in RSP plans.
|
| |
|
|
What is a mutual fund? |
| |
A mutual fund is simply a professionally
managed investment that pools your money with the money of
other like-minded investors who have similar investment goals.
Your investment is used to buy securities that, in the fund
manager's judgment, will help achieve specified investment
objectives of the fund. The fund manager is able to purchase
a wider variety of securities than most investors could afford
to buy individually. |
| |
|
|
What are the benefits of
investing in mutual funds? |
| |
When you invest in mutual
funds, you are able to invest in a wide array of companies
and industries. You can also invest in different types of
assets, such as equities, corporate and government bonds and
cash reserves. This is a level of diversification that for
you, as an individual investor, would take much effort and
money to achieve on your own. Such diversification reduces
the risk of loss from problems with any one company or institution.When
you invest in a mutual fund, income that you may earn can
be reinvested on your behalf. This means you are earning money
on both your initial principal and on the money your investment
is making. With the added advantage of investing in mutual
funds within your RRSP, the growth potential can be quite
substantial over time. |
| |
|
|
How much do I need to start? |
| |
The minimum initial investment
is $1,000 for a non-registered account and $100 for an RRSP
account. The minimum subsequent investment is $100 for both
types of accounts. |
| |
|
|
Why do people use mutual
funds? |
| |
Many people purchase mutual
funds because they are a convenient and cost-effective method
of obtaining diversification and professional management.
Because mutual funds hold anywhere from a few securities to
several thousand, risk is spread out over a number of investments.
Additionally, mutual funds generally buy and sell securities
in volume, which allows investors to benefit from lower trading,
management and research costs. |
| |
|
