The different types of retirement savings plans

Everyone does their best at work to secure a good future for their family, especially the working service classes. What you as a working class professional tend to forget is that there will be a time when you yourself will need security.

This security is important so that you don’t have to worry about finances when planning a trip or buying something expensive after retirement. The best way to secure your retired life is by getting a Retirement Saving Plan (RSP), often called the Registered Retirement Saving Plan (RRSP).

There are four types of retirement savings plans in the U.S:

  • Individual RRSP: Where an individual contributes.
  • Spousal RRSP: Where the high earner contributes for their spouse. It is a kind of income-splitting retirement savings plan.
  • Group RRSP: It is between the employer and their employees. The employer arranges for their employees to make whatever contributions they would like by deducting the amount from their income.
  • Pooled RRSP: It is one of the new retirement savings plans which is ideal for the employer and employees who are involved in small businesses or individuals who are self-employed.

This retirement savings plan has a number of tax-saving advantages. You can save some amount of tax by deducting the contribution of RSP from your salary every year.

The money that is being saved in the Registered Retirement Savings Plan is not really taxed as long as it stays in the savings plan.

Also, there are certain limits set up as to how much exactly you can contribute to your retirement savings plan. An individual can contribute 18% or below of his/her income in the previous year, but this limit may differ every year.

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