November is Financial Literacy Month. Check out FCAC’s promotional materials and join the conversation online using #FLM2017 to spread the word and raise awareness about the importance of financial literacy.
As a REALTOR®, you often work one-on-one with clients as they navigate through the largest financial transaction of their lives. You are in a unique position to support Canadians in making responsible financial decisions by helping them access good information, including financial planning tools such as a Registered Retirement Savings Plan (RRSP).
Today, we take a closer look at some questions your clients might have.
What is an RRSP?
An RRSP is an account designed to help Canadians save for retirement on a tax-sheltered basis (the income earned in an RRSP is not taxed until it is withdrawn).
How do you set up an RRSP?
Canadians can set up an RRSP through a financial institution, such as a bank, credit union, trust or insurance company. A financial institution will advise your clients on the types of RRSPs and the investments they can contain. Learn more about how your clients can set up an RRSP.
How can RRSPs help with homeownership?
According to a 2016 TD Bank survey, more than 30% of young Canadians were “not at all knowledgeable” about retirement savings plans, including half of respondents who did not know RRSPs could be used to help purchase a first home.
You have the tools available to educate your clients, particularly young Canadians, about the importance of RRSPs and how RRSP funds can be used to help transition to homeownership through the Home Buyers’ Plan (HBP).
The HBP allows first-time homebuyers to withdraw up to $25,000 from their RRSPs to use towards the purchase of a home. The repayment period starts two years after the funds are withdrawn, and one fifteenth of the withdrawn funds need to be repaid each calendar year or it will be taxed as income.
Owning a home can be an important piece of retirement security planning. This is why the HBP was introduced: it combines the twin goals of saving for a home and saving for retirement, eliminating the need to choose one over the other.
Remember, in order for the money put into an RRSP to count as an HBP repayment, your clients must designate it as such on their tax return. Otherwise, the Canada Revenue Agency (CRA) will consider it a regular contribution.
See below for a short video that can help you define terms – such as RRSP and HBP – for your clients, and be sure to visit the Financial Consumer Agency of Canada’s (FCAC) website for additional tools and resources to share.