What is an RRSP?
A Registered Retirement Savings Plan (RRSP) is a savings plan, registered with the Canadian federal government that you can
contribute to for retirement purposes.
When you contribute money to a RRSP, your funds are “tax-advantaged”, meaning that they’re exempt from being taxed in the year you make the contribution. Any investment income earned from investments held within the RRSP can then grow taxdeferred, as long as the money remains within the RRSP, until it’s withdrawn.
RRSP contributions are tax-deductible, meaning that they can be deducted on your current year tax return, potentially reducing the total amount of taxes you pay.
When you contribute money to a RRSP, your funds are “tax-advantaged”, meaning that they’re exempt from being taxed in the year you make the contribution. Any investment income earned from investments held within the RRSP can then grow taxdeferred, as long as the money remains within the RRSP, until it’s withdrawn.
RRSP contributions are tax-deductible, meaning that they can be deducted on your current year tax return, potentially reducing the total amount of taxes you pay.
How does RRSPs work?
You can hold a wide range of investments within an RRSP, depending on the type of plan, including stocks, bonds, guaranteed investment certificates (GICs), and mutual funds. Investment income earned from these investments, is tax-deferred in the RRSP until you withdraw the funds. How much you can contribute annually is subject to a maximum contribution amount, known as your RRSP contribution or deduction limit.
What are the benefits of contributing to RRSP?
Benefits of Contributing to an RRSP are as follows:
- With an RRSP, your contributions are tax-deductible, meaning that you can deduct the amount you contribute from taxable income when filing your taxes. This means potentially paying less tax and saving more money.
- Any growth of your investments inside an RRSP is not taxed until withdrawn, potentially allowing your savings to grow faster.
- RRSPs are versatile savings vehicles – while RRSPs are primarily used to save for retirement. You can also use your RRSP to help with the down payment on your first home through the Home Buyers' Plan or to fund your education through the Lifelong Learning Plan1.
