In Canada, a registered retirement savings plan (RRSP) is a financial tool that helps individuals save for their retirement. The contributions made to an RRSP are tax-deductible, which means that you can reduce your taxable income by the amount you contribute. The money in the account grows tax-free until you withdraw it, usually during retirement. At that time, you will pay taxes on the amount withdrawn, but typically at a lower rate than your current tax bracket. The RRSP is a popular way for Canadians to save for their future and reduce their tax burden.
Benefits of an RRSP
Contributions and earnings in RRSPs do not have to be taxed as long as they remain in the account. You will receive a tax refund if you deduct your contributions from your taxable income. In addition to retirement, the sums accumulated can be used to buy or build a house, thanks to the Home Buyers’ Plan, or to pay for your education if you return to school thanks to the Lifelong Learning Plan.