INSURANCE: RESP (Registered Education Savings Plan) :
The best gift a parent can give his children is knowledge which comes from education. A parent always wants the best of all the worlds for his child. But with education cost rising continuously it has become difficult for parents to cope up with it.
A Registered Education Savings Plan (RESP) is a saving plan registered under government of Canada. Under this savings plan, a parent, friend or any family member can start putting aside some money for a child’s post secondary education. RESP allows your savings to grow tax free until the child named in RESP enrolls in a post-secondary education program.
The eligibility criteria for applicant is Applicant should have a Social Insurance Number (SIN)
have a SIN for anyone named in the RESP as a beneficiary other criteria may apply
Having a RESP can have numerous benefits as outlined below:
- The Canada Education Savings Grant (CESG) – 20% of annual plan and a maximum up to $7200 per beneficiary in lifetime
- The Canada Learning Bond (CLB) – Up to $2,000 per beneficiary
- The Alberta Centennial Education Savings Plan (ACES) (for residents of Alberta) – Up to $800 per beneficiary
- The Quebec Education Savings Incentive (QESI) (for Quebec residents) – Up to $3,600 per beneficiary
RRSP ( Registered Retirement Savings Plans)
An RRSP is a way in which people of Canada can keep saving money for their retirement. This scheme is a government sanctioned registered scheme that allows you to invest in a broad range of products that exhibit growth and keep building wealth for you. The products in which you are allowed to invest are GICs, mutual funds, individual stocks and bonds.
Of course, it might appear that continuously saving for 30 to 40 years of life is really a painful task. However, a well-planned series of contributions and withdrawals can make your life much easier when you are retiring from work and are ready to spend your older age with complete financial security. Your RRSP limit for the current year is determined as follows:
Your unused RRSP deduction limit carried forward from prior years
Plus 18 percent of your previous year’s earned income ( up to a maximum of $16,500 in 2005, $18,000 in 2006, $19,000 in 2007, $20,000 in 2008, $21,000 in 2009 and $22,000 in 2010)
Less any pension adjustment for the prior year ( for those who have company pension plans)
For an RRSP contribution to be deductible, it must be made within 60 days of the calendar year end (i.e., March 1, or February 29 in a leap year). In case of the deadline falling on a weekend, it is extended to the next business day.
ADVANTAGES YOU GET AT THE RETIREMENT:
The standard age of retirement is assumed to be 71 years and as per the current government rules; you are required to receive your saved money in one of the following ways:
- Cashing the money you have saved directly. However, this requires you to pay the tax on the entire amount you receive right after you receive the cash. It is not a very tax efficient solution, since the tax liabilities of big amounts are generally huge.
- Converting the money into a life annuity. This involves receiving the payment periodically either on a monthly or an annual basis. The amount thus is disbursed throughout the rest of life and is safe from any volatile market changes.
- Converting the RRSPs into a Registered Retirement Income Fund. It minimizes the amount of income received during the early years of retirement. Therefore, it also minimizes the amount of tax that needs to paid. Also, it allows you to wishfully change the cash amount you receive based on your needs and preferences.