Registered Retirement Savings Plans (RRSPs)

A Registered Savings Plan (RRSP) allows you to grow your investments tax-free. Registered with the federal government, individual RRSPs offer a number of unique benefits that can help individuals save more for their future.

What is an RRSP?

An RRSP is one of the most common portions of retirement plans in Canada. Individuals—as well as their spouses or common-law partners—can contribute to these plans up to an annual RRSP contribution limit using a mix of investments, including stocks and mutual funds.

What’s more, RRSPs have two tax benefits that help you save for your retirement:

1. Tax-sheltered growth—Investment income in your RRSP isn’t taxed while within the plan. In most cases, investors won’t have to pay any tax until funds are withdrawn. Because you may be in a lower tax bracket once you’re ready for retirement, your total savings can be significant.
2. Tax deductions—Individual RRSPs can be used to reduce your tax, as contributions are deductible within specified limits.

You can also withdraw funds from your RRSPs without being penalized, provided the money is repaid by a specified time. This can be particularly useful for large purchases, like buying your first home or paying for your education.

READ: Learning for Life with the RRSP Lifelong Learning Plan (LLP)

There are a number of qualifications you must meet in order to open an RRSP. Simply put, if you have earned income and file an income tax return in Canada, you can contribute to an RRSP until Dec. 31 of the year you turn 71.

You must also have contribution room available, which will be stated on your annual Notice of Assessment sent by the Canada Revenue Agency (CRA).

RRSPs are one of the best ways to save for retirement and ensure you are financially secure once you leave the workforce.

To get started with RRSPs, or to learn more, contact us today.