Make the most of your Retirement Savings by Investing in an RRSP

If you're a New Canadian citizen or resident, you undoubtedly came here with many goals and dreams for your future and the future of your children. You may also have given some thought to your retirement years. But saving for a successful retirement can present challenges financially, especially if you have other financial priorities, like buying a new home or saving for a child's education.

The good news is that there are tools that can help; the most important of all is a Registered Retirement Saving Plan (RRSP). An RRSP is a personal savings plan that allows you to build a retirement income for your future while giving you immediate tax benefits today.

In order to take full advantage of an RRSP you will want to begin making contributions as soon as possible, no matter what your age or how close you are to retirement. That's because the money you put in the plan begins to grow on a tax-deferred basis immediately.

"The concept is simple," says Mandy Dhinsa, Branch Manager at RBC Royal Bank®. "You put money into an RRSP and this money, which is invested, grows tax-sheltered until it is withdrawn. The RRSP must be closed and paid out as a retirement income by the end of the year in which you reach age 71. You will then begin paying taxes on the funds". Chances are you may be in a lower tax bracket when you retire, so you may not be as heavily taxed as you would be when you originally made the contributions and earned income in the plan. Even if not, the years of tax deferral allow you to earn extra income using government money.

But tax deferred growth isn't the only benefit to investing in an RRSP. Contributions to your plan also reduce your current taxable income for the year. For example, someone in Ontario earning $50,000 a year will get just over $300 back for a $1,000 RRSP contribution. That's money in your pocket now.

Investing in an RRSP is a smart, tax-efficient way of saving for retirement, but it's important to remember that an RRSP is not an investment in and of itself. It's simply a special type of savings plan, so you'll need to select the specific investments to hold within it. Here you have many options.

"Within your RRSP, you might hold savings deposits, mutual funds, stocks, bonds or any number of other investments," adds Mandy Dhinsa. "The type of investments you choose will depend on your retirement goals and your investment profile. This is where a financial advisor can help. They will also help you build a plan according to your unique goals and circumstances as a newcomer to Canada."

In order to take full advantage of your RRSP, there are a few things you need to keep in mind:

• Whatever your age or personal situation, it's never too early to contribute: In fact, the earlier you start making contributions, the better off you'll be towards achieving your financial goals for retirement.
  
  
• Make your contributions before the yearly deadline: To claim a deduction on your taxes for the current year, you can make contributions anytime during the year, or up to 60 days into the following year.
  
  
• Know your RRSP contribution limits: There is a limit on how much you can contribute each year. Your allowable RRSP contribution is the lower of 18 per cent of your earned income from the previous year, or the maximum annual contribution limit for the current year (which, for 2007, is $19,000), less a pension adjustment if you are a member of a pension plan. Your limit is provided by the Canada Revenue Agency when you file your income tax returns.
  
  

To learn more about RRSPs, or to speak with an investment professional, please visit any RBC Royal Bank branch or visit http://www.rbc.com/firstrrsp