WHAT IS CRITICAL ILLNESS INSURANCE?
Critical illness insurance provides additional coverage for medical emergencies like heart attack, stroke, or cancer. Because these emergencies or illnesses often incur greater than average medical costs, these policies pay out cash to help cover those overruns where traditional health insurance may fall short.
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BENEFITS OF CRITICAL ILLNESS INSURANCE
- Critical illness insurance provides additional coverage for medical emergencies like heart attack, stroke, or cancer.
- Because these emergencies or illnesses often incur greater than average medical costs, these policies pay out cash to help cover those overruns where traditional health insurance may fall short.
- These policies come at a relatively low cost. However, the instances that they will cover are generally limited to a few illnesses or emergencies.
WHAT IS A RRIF?
A RRIF is really a continuation of your RRSP, but with a twist: you can’t make regular contributions to a RRIF – only withdrawals. That’s because the main purpose of a RRIF is to provide a source of ongoing retirement income. Here’s how a RRIF works:
- Transfer assets in. RRIF can only be funded by a transfer of assets from RRSPs or RRIFs owned by you. A deceased spouse/common-law partner. Registered pension plan or a deferred profit-sharing plan. You can’t make contributions to an RRIF (with some rare exceptions).
- Keep savings tax-sheltered. Like an RRSP, a RRIF is a tax-sheltered vehicle in which you make the investment decisions. You have complete flexibility in tailoring an investment strategy to meet your financial needs.
- Make ongoing withdrawals. Each year, you must withdraw a minimum amount from your RRIF. The minimum withdrawal is based on a percentage of your RRIF assets and increases with your age. For example, the minimum RRIF withdrawal rate is 7.38% at the age of 71 (the last year in which you can hold an RRSP) and levels off at 20% at 94 years and over.
Just like withdrawals from an RRSP, all withdrawals from a RRIF are taxable, and there is no maximum withdrawal limit.
WHAT IS A REGISTERED RETIREMENT SAVINGS PLAN (RRSP)?
A Registered Retirement Savings Plan (RRSP) is a retirement savings and investing vehicle for employees and the self-employed in Canada. Pre-tax money is placed into an RRSP and grows tax-free until withdrawal. At which time it is taxed at the marginal rate. Registered Retirement Savings Plans have many features in common with 401(k) plans in the United States, but also some key differences.
The growth of an RRSP is determined by its contents. Simply having money in an RRSP is not a guarantee that you may retire comfortably. However without being taxed a compound investment is a guaranteed. As long as the funds are not withdrawn.
WHAT IS AN RESP?
A Registered Education Savings Plan is, like the name suggests, an investment account geared towards saving for a child’s education. Like its tax-shelter cousins the RRSP* and TFSA*, an RESP allows investments inside the account to grow tax free, meaning no taxes on capital gains and no income taxes on interest and dividend payments. The big benefit with RESPs, though, is that the government pays you to save by kicking in a grant of up to $7,200 over the life of the plan.