If you’re like most people, retirement is not something you think about until it’s too late. However, it’s important to start planning for your retirement as soon as possible. One of the best ways to do this is by contributing to your Registered Retirement Savings Plan (RRSP). In this blog post, I’ll discuss three reasons why you should care about contributing to your RRSP.
Tax Benefits
I’m a little late on releasing this blog post, but better late than never am I right? One of the main reasons why you should care about contributing to your RRSP is the tax benefits. Your contributions to your RRSP are tax-deductible, which means that you can reduce your taxable income this year and pay less tax. For example, if you earn $50,000 a year and contribute $5,000 to your RRSP, your taxable income will be reduced to $45,000. This can result in a significant tax savings. The deadline to contribute for the 2022 tax year was March 1, 2023 so if you’re reading this after that, don’t worry you have a head start on contributing for the 2023 tax year.
Experts like accountants say that it makes most sense to contribute to your RRSP when you make $70,000 or more. I interviewed Stephanie of Serenity Accounting to learn more. Watch below.
Compound Interest
Another reason why you should care about contributing to your RRSP is compound interest. The earlier you start contributing to your RRSP, the more time your money has to grow. The longer your money is invested, the more interest it will earn. Over time, your contributions and the interest earned will compound, resulting in a larger retirement fund. They call it a registered retirement savings plan, but remember, you can also invest through this account. Take advantage of the tax deferral when you use this account.
Securing The Retirement Bag
The third reason why you should care about contributing to your RRSP is to secure your retirement. The Canada Pension Plan (CPP) pays an average of $715 a month during retirement. While this does provide some support during retirement, it likely is not enough to cover all your expenses. By contributing to your RRSP, you can ensure that you have enough money to live comfortably during your retirement years, without relying on your children or the government.
Conclusion
In conclusion, contributing to your RRSP is a smart financial decision. It provides tax benefits, and compound interest, and helps secure your retirement. Even if you’re just starting out, it’s important to contribute what you can, especially if your employer matches your contributions! The earlier you start, the more time your money has to grow. So, don’t wait until it’s too late. Start contributing to your RRSP today and enjoy a secure retirement tomorrow.
Will you start investing or saving through your RRSP? Let me know in the comment section if you have any comments or questions.
xo,
Reni
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