CPP question

[canfra]

I am Canadian living in France for 5 years now. I have some RRSP. If I return to Canada am I eligible for CPP when I retire?

[trent]

RRSP and CPP are completely different things. RRSP stands for Registered Retirement Savings Plan, while CPP is Canada Pension Plan.

The RRSP allows you to put money aside for retirement and at the same time it gives you a tax break on your income tax. The money you contribute in your RRSP account are tax deductible up to certain level. The good thing is that the money in your RRSP can grow tax free until you start taking money out of the account. Contrary to popular believe, you can withdraw money from your RRSP account at any time even before you reach a retirement age, however when you withdraw you have to pay taxes on the money.

Almost every Canadian citizen older than 18 who earns a salary must contribute to Canada Pension Plan. The CPP contributions are split between you and your employer, and unfortunately self-employed Canadians are responsible for contributing the entire CPP amount.

[Steven]

Thanks Trent!

This is a very good explanation of the differences between CPP and RRSP. Do you know how much will be the taxes if I withdraw certain amount from my RRSP before retirement? Are there any penalties on top of the taxes you have to pay for doing that?

[trent]

Whatever you withdraw from RRSP, is just added to your personal income for the year and you will have to pay personal income tax on it as with any other personal income. I don't think there are any penalties (confirm this with your accountant), however when you withdraw from RRSP certain certain percentage of that money goes directly to tax, and then when you file your tax return for the year you make adjustments according to what has been already paid.

[Steven]

Thanks for the help Trent.
I'll talk to my accountant later today, just to confirm what you said.

[Canadian]

You can withdraw from your RRSP accounts anytime, however you'll be taking serious tax hit if you do that, because everything is added to your personal income for the year.

[ggonzo]

Hi canfra,
How is in France, do you feel the economic crises that hit US and Canada?