RRSPs-Answers to Common Questions

Tue Feb 5, 2013 9:12am EST

* Reuters is not responsible for the content in this press release.

Thinking of buying a lottery ticket in hopes of funding your retirement?
Why take chances with your money when you can invest in a safe and secure
registered retirement savings plan (RRSP)?

    Why buy an RRSP?

    In addition to helping you save for retirement, there are two great tax

    1. An RRSP contribution reduces your income tax. Depending on your
income, you'll end up either owing less tax or receiving a higher refund.

    2. The money earned by an RRSP is not taxed until it's withdrawn; it
grows tax-free while it's in your plan. Then, when you're ready to
retire, you're likely to pay less tax on it because your income is
typically lower. 

    Purchasing an RRSP will help reduce income tax and accumulate
tax-deferred savings for your retirement.

    But what about the government pension plan?

    As of 2011, more than 20% of the population is 65 or older. Fewer people
are working and contributing to the government pension plan, so your
pension benefits might not be as generous as you expect. So when it comes
to pension planning, it makes sense to have your own plan in place. 

    How do people manage to come up with money at RRSP time?

    Many people contribute smaller regular monthly amounts instead of one
large annual lump sum payment. Not only is it easier to budget, but it
also increases the value of the investment faster. You can talk to your
financial advisor about whether you might benefit from an RRSP loan.

    What's the difference between buying an RRSP from a life insurance
company compared to another financial institution, like a bank?

    One important difference is the type of investments held within an RRSP.
Life insurance companies can offer a secure option called segregated
funds. Just like mutual funds, segregated funds are invested in equities,
bonds and other investments. However, they differ dramatically in that
segregated funds guarantee all or most of your principal investment upon
maturity or death, while mutual funds generally have no guarantees at

    What are the benefits of buying your RRSP through a life insurance

    Financial strength. Strict legislation makes the Canadian life and health
insurance industry one of the strongest financial sectors in the world. 

    Retirement options. At retirement, life insurance companies also offer a
full range of options for your RRSP funds, including Registered
Retirement Income Funds (RRIFs) and annuities payable for life. Life
annuities are only available through life insurance companies.

    Protection against creditors. RRSPs held with life insurance companies
offer potential protection from creditors. In most cases, if you name a
spouse, child, grandchild or parent as a beneficiary, the benefit is
protected from the claims of creditors. This feature is especially
important for business owners.

    Fast settlement of claims. In the case of death, the funds will pass
directly to your named beneficiary, avoiding costly probate and legal
fees as well as lengthy delays.

    A Consumer Protection Plan administered by Assuris provides protection to
policyholders by guaranteeing up to $60,000 or 85% of the segregated fund
RRSP money (whichever is greater) per individual per member company. 

    For more information, contact a local Financial Advisor or visit our
website at localagent.cooperators.ca.

    (i)Statistics Canada. (2012, May 30). The Canadian Population in 2011:
Age and Sex. Retrieved from: http://www12.statcan.gc.ca/census-recensemen

    About The Co-operators

    The Co-operators is the leading Canadian-owned multi-product insurance
company with agents in over 600 locations across the country. Together,
we protect over one million Canadians with the same care and personal
service that have made us a true Canadian champion for over 65 years. Ask
us about our complete line of insurance and investment products. 

The Co-operators

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