Bruce MacKay - Planning your retirement

Retirement Planning

Retirement Savings Plans (RSPs)

Retirement Savings Plans (RSPs) are tax-sheltered investment vehicles whose contributions result in a tax deduction while income earned in the plan compounds on a tax-deferred basis. You can contribute to an RSP up to the end of the year in which you turn 71. RSP-eligible investment options include fixed-income securities, equities, mutual funds, private company shares and more.

The Retirement Income Fund (RIF)

By December 31 of the year you turn 71, all your RSP assets must be converted by December 31 in the year you turn 71, and one of your conversion options for drawing upon that income is a Retirement Income Fund (RIF). Registered Retirement Income Fund

A RIF is essentially an extension of your RSP, in which your RSP assets are transferred to the RIF on a tax-deferred basis. You keep the same flexibility and control over how your investments are managed as you do with your RSP, yet you must withdraw a certain amount of income every year from your RIF.

Retirement Compensation Agreements (RCAs)

An RCA allows a business owner or professional to increase their personal assets to the maximum permissible level. It is employer-sponsored and designed to provide a variety of benefits for both the RCA participant (usually a key or high-ranking employee) and the company. There are a number of benefits for both the employee and the employer, including:

Immediate tax deduction to employer
Deferral of recognition of income by the employee to future years at potentially lower tax rates
No prescribed contribution or withdrawal dates
No impact on existing RSP limits
Creditor protection

Retirement Checklist

Learn more

Individual Pension Plans (IPPs)

An Individual Pension Plan (IPP) is a defined benefit pension plan established by an incorporated company, typically for one individual. An IPP may enable you to make higher tax-deductible contributions than the maximum permitted for RSPs and enhance your retirement income. It offers flexibility and liquidity, helps boost personal retirement savings, and contributions and expenses are tax-deductible for the corporation.

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Individual Pension Plans (IPPs)

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Are you an incorporated business owner or professional receiving T4 income while contributing to an RRSP?

If so, you may want to consider an Individual Pension Plan (or IPP).

An IPP is a defined benefit pension plan your company can set up for you.

An IPP is ideal if you’re between the ages of 40 and 71, earning T4 income, and have owned your company for several years.

With an IPP, you can make higher annual contributions than an RRSP...

...and gain the ability for your company to make a large tax-deductible past- service contribution.

In addition, the company can make a top-up contribution if IPP assets fail to grow by 7.5% per year with adjustments.

Here’s a chart showing a comparison of IPP funds versus RRSP funds for someone who is 50 years old, with 23 years of past service.

As you can see, the ability to make a large past-service contribution, along with the increased annual IPP contributions, result in a higher registered plan balance.

While IPPs do involve more complexity and have higher annual fees than RRSPs, the fees are fully tax-deductible.

This video is provided by RBC Wealth Management for informational purposes only. The comments contained in this video are general in nature, and do not constitute legal, investment, trust, estate, accounting or tax advice. RBC Dominion Securities Inc.*, Royal Trust Corporation of Canada, The Royal Trust Company, RBC PH&N Investment Counsel Inc., RBC Wealth Management Financial Services Inc. are affiliated corporate entities and member companies of RBC Wealth Management, a business segment of Royal Bank of Canada. *Member – Canadian Investor Protection Fund. Please visit www.rbc.com/legal/ for further information on the entities that are member companies of RBC Wealth Management. ®/TM Trademark(s) of Royal Bank of Canada. Used under license. © 2020 Royal Bank of Canada. All rights reserved.