And just like that, 2012 has arrived. I can still remember the scare of Y2K and the thoughts of possibly moving to the mountains in retreat for all the promised dangers of the changing millennium. 

Several years ago, right alongside of the Christmas and New Year’s celebrations, banks and financial institutions were preparing Canadians to participate in what was called the ‘RRSP season’. The season is upon us now and the need still exists, but for whatever reason the buzz and excitement that existed years ago has slowly dissipated.

An RRSP (Registered Retirement Savings Plan) is a government designed program that offers tax incentives to encourage Canadians to save more aggressively towards their retirement. These plans can be set up at any financial institution, such as Banks, Credit Unions, Trust or Insurance Companies. It is important to note that there are specific benefits and drawbacks of the RRSP plan, here are just a few:

1. Contributions lower your taxable income and enjoy tax free growth, as long as the funds remain in the plan.
2. Contributions are limited to 18% of the previous year’s earned income to a maximum of $22,450 (less any pension adjustment, plus any carry forward of unused room).
3. You can contact CRA to find out your RRSP limit by calling -1.800.267.6999 or check online at www.cra-arc.gc.ca/myaccount/
4. Consider an income splitting strategy of making a contribution to a Spousal Plan if you are in a higher tax bracket than your spouse.
5. Plans have a lifetime over-contribution limit of $2,000, with a penalty of 1% per month for amounts that exceed the limit.
6. Consider borrowing from your RRSP to fund the purchase of your first home through the HBP (Home Buyers Plan), where up to $25,000 can be used.
7. Any unused contribution amounts can be carried forward to subsequent years.
8. Drawback: Funds are considered fully taxable when withdrawn from the plan.

Whatever your objectives, the best strategy is to start now! This year’s contribution deadline is February 29, 2012. Don’t miss it.

The unfortunate reality is that the current government programs of OAS (Old Age Security), CPP (Canada Pension Plan) and the GIS (Guaranteed Income Supplement), are not enough for the average Canadian to retire on. You and I need to play a very active part in ensuring that we have adequate savings to enjoy the lifestyle we desire in retirement.

The RRSP program is not the only plan that can be utilized for retirement savings, but it is perhaps the best place to start!

Anthony Burke
Pastor Economic Development