Did you say RRSP?

Shannon Childs, PFP®, 
Personal Financial Planner, SISIP Financial 

— 

January always seems to be a buzz with talk of Registered Retirement Savings Plans (RRSPs) and income tax; you hear about it on the news, at the dinner table and at work and of course, at your local SISIP Financial office, it is no different! Make your finances part of the conversation throughout the year.

As financial planners, we are always extolling the tax advantages of RRSPs, but often hear “No thanks, I have a great pension plan, I don’t need an RRSP”. While it is true that the Canadian Armed Forces (CAF) does offer an excellent Pension Plan it is also true that no two financial situations are alike. Even though your friend or co-worker may have the same rank, monthly allotment and years of service as you, your financial needs and goals may vary widely.

RRSPs can add significant value to your financial plan during your working years, in retirement and within your Estate plan. Whenever you contribute to an RRSP it reduces your taxable income today, which means you pay less tax now and you are putting money away to grow, tax sheltered, for the future. You can save even more money by strategically planning your RRSP withdrawals. Let’s look at some situations that people may not always consider when they think of an RRSP.

Is the cost of buying a home to high in your current province?

If you plan to buy a home at a future posting or in retirement, consider using the RRSP homebuyers program (HBP). The HBP is not just for first-time homeowners. You can utilize the HBP more than once provided you and/or your spouse have not owned a home in the four years prior to the home purchase. You can “borrow” up to $60,000, tax free from both yours and your spouse’s RRSP to put towards the payment for your new home. By contributing to your RRSP you can be saving towards your new home while receiving a tax deduction which you could also reinvest to compound your savings strategy.

What’s on your retirement bucket list?

If you are married or common-law, you have the option of contributing to a spousal RRSP. This will reduce your taxable income today and create a future nest-egg to be withdrawn by your spouse as income in retirement. You can then allocate the spousal RRSP to pay for the fun stuff such as travel, sports, and hobbies while your CAF pension can be used to pay the monthly and annual household expenses (bills, maintenance, etc.)

Have you calculated survivor income needs yet?

Having funds in a RRSP can help fund any shortfalls in your Estate plan. When a retirement member passes, the surviving non-military spouse is entitled to a 50 per cent Survivor Pension. But, will that be enough to ensure your spouse has a comfortable income for life? Saving through an RRSP or spousal RRSP can help fund future income needs, not to mention that generally it will be taxed in a lower bracket.

Talk to a financial advisor at your local SISIP Financial office and ask how an RRSP can benefit your specific financial plan. The deadline to contribute for the 2024 tax year is March 3, 2025.