Registered Retirement Savings Plan (RRSP)

There is one subject that is often over looked when considering relocating to another country, and that is:

"What happens when i retire?"

Well the simple answer to this is "Research Before You Move".

It should be part of your "Big Immigration Plan" to find out about State pensions, investments and international agreements between certain countries with regards to the paying of State Pensions.

Now please don't think that this blog will give you all that information because it would be impossible to cover all different countries and personal circumstances, so think of this as a pointer to send you in the right direction.

There is one financial product i would like to tell you about though because as well as helping to provide for your financial well being in your senior years... it will also benefit you now.

The RRSP is basically a savings account that you can fill with chunks of money and also filter some of your monthly income into. This money is then invested by your bank or financial institution to gain interest. This is a long term investment plan and is designed to grow until you retire, if however you cash it in early or dip into it you will pay tax on it.

The choice is yours when it comes to the investment, you choose the level of risk you are prepared to take and the return is determined by that choice.

If you wish to play it safe then it will be invested in an option like the Guaranteed Income Certificate which will guarantee a particular interest rate over a period of time. The income generated from this type of investment is usually low end but the advantage is that it is guarranteed.

The other option would be to invest it in a Mutual Fund... this is where the mony is worked by a Fund Manager and it is invested in Financial instruments for example, Bonds, Gilts and the Stock Market. Again you get to choose the level of risk and the percentage of your fund that is staked.

If you wish to be a little conservative then your invest in the lower end of the scale wher only about a quarter of the fund is speculated and then only the safer Gilts, metals and Bonds, this is safer but gives a lower return. The other end of the scale is Aggressive Investing where most or all of the fund is invested within the Stock Market on more volatile instruments and therefore has the oportunity to bring in greater returns. Bear in mind that stocks can also go down as well as up so your investment could shrink as well as grow, which is why you have the choice of how much risk you are willing to take.

Now the short term advantage of RRSP's is that every dollar you invest in any financial year is deducted from your End Of Year gross income. When you file your tax return it will mean that you have over paid on income tax and will give you a larger refund.

Here is an example:

If you earn $65,000 and invest $10,000 in an RRSP, this takes your declared gross down to $55,000.

But through out the year you have paid tax on the $65,00 which means you have over paid, and therefore you get refunded.

Of course there are limits to what you can or cannot do so this is maybe something you can add to your Immigration Research To-Do List

... Or you could plan to be a 70 year old truck driver someday.