Fees

The cheapest option for someone who doesn’t really want to worry about making frequent decisions regarding investment is probably a managed mutual fund portfolio.  A mutual fund representative will invest your money for you (probably in mutual funds) held in your RRSP account.  If your funds are doing poorly, he or she may give you a ring and discuss this with you.  They will discuss whether or not to sell the fund and go with another.  However, the fees may be substantial.  They can include fees to transfer funds in, transfer funds out, administrative fees and commission for when a fund is sold or bought.  And remember that this is the cheapest option.

How Much To Invest?

The most you can invest in your RRSP account per annum is whatever is less of 18 per cent of your income or the maximum per year, which varies year to year.  For example, it was $21,000 in 2009.

When To Withdraw?

Your RRSP account will be converted to a RRIF account (Registered Retirement Income Fund) by December 31 of the year you turn 71.  This means you can’t contribute money into the account and must withdraw a minimum amount each year, which would depend on your age.

Benefits Again

It’s important to stress the benefits of RRSP accounts, just because all this information may have been a little bit stressful.  The first obvious benefit is that it prepares you for your retirement.  Also, there are tax benefits, especially when your income is high because your total annual contribution can be deducted from your income during tax season, which means you pay less income tax.  Not only that, the RRSP income you earn is not taxable until you withdraw it, so the total value will likely grow more quickly.  This means that when you actually do withdraw these funds upon retiring, you will most likely be in a lower tax bracket, so you don’t pay as much tax.

Before You Invest

Before you invest, be sure to get more information in person with a financial advisor who can go more in-depth and explain to you exactly what you don’t understand or the areas that need more clarification.  They can explain the pros and cons and look at your personal finances to help you decide what opportunities are the best for you.