Rules to abide by when investing in RRSP’s

One of the best of preparing for retirement is by investing in RRSP’s. However, there are strict rules that have been enforced by the government for regulating these accounts. Understanding and abiding by these rules and regulation will help in maximizing retirement savings while avoiding unforeseen tax penalties that may arise. Here, one should also determine the best RRSP GIC rate and term. Here are some of the rules and regulations that must be observed when investing in RRSP’s. 

Age limits required while investing in RRSP’s  

For this program, there is no minimal age limit required. Those seeking investing in RRSP’s must qualify for employment income and must have filed tax returns. However, for the under aged group, parent or guardians may start investing in RRSP’s while making the required contribution. There is no age restriction limit as compared to other saving accounts that require minimal age limit of 18 years. On the other hand, investing in RRSP’s has a maximum age limit of 71 years. After one has attained 71 years, RRSP account should be closed at the end year. After attaining 71 years, account holder is left with three options; close the account completely where all the money should be withdrawn, changing RRSP account to RRIF or using the money save in RRSP account for purchasing annuity.  

RRSP beneficiaries 

Investing in RRSP’s requires that the account holder selects one or more personnel to be the beneficiary from RRSP account in case of death. In case an account holder does not nominate a beneficiary, savings made on the RRSP forms a part of holder’s estate and where it is divided accordingly. There are three specific conditions when RRSP savings remain tax sheltered after account holder dies.  

First, if RRSP account holder spouse is named beneficiary for the RRSP account. In this case, all proceeds will be sheltered from taxation until when they are transferred to the existing beneficiary RRSP or RRIF account. Two, if the account holder does not have a living spouse thus have named the beneficiaries to be the kids or grandchildren. Here, the proceeds from RRSP holders account are transferred to a specific term referred to as annuity regarding to the beneficiary’s names. Third, if RRSP account holder has children or grandchildren with mental or physical illness, whom are main financial dependents. In this case, they do not necessarily have to be minors (below 18 years of age). Thus, the proceeds of the deceased will be transferred to RRIF or RRSP that has been registered using the children’s names. Also, the proceeds can be used for buying annuity for the children. If one qualifies for the above rules and regulations, then one would consider investing in RRSP’s as a retirement investment.  

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