Registered Retirement Savings Plan (RRSP)

What is an RRSP?

An RRSP is a tax-advantaged retirement savings account that helps Canadians save for retirement by allowing them to deduct contributions from their taxable income. Funds can grow tax-free until they are withdrawn in retirement, potentially when the individual is in a lower tax bracket.

Benefits

• Tax Deduction: Contributions reduce taxable income, providing immediate tax savings.

• Tax-Deferred Growth: Investment earnings within the RRSP are tax-deferred until withdrawn.

• Home Buyers’ Plan (HBP) and Lifelong Learning Plan (LLP): RRSP holders can withdraw funds tax-free for a down payment on a first home or for educational purposes, provided they meet the program’s criteria.

Key Considerations

• RRSP withdrawal rules can trigger taxes and penalties if not done under the HBP or LLP.

• Contributions are based on a maximum contribution room that’s generally 18% of the previous year’s income, up to a set annual limit.

Important Dates

• March 1: Deadline to contribute to an RRSP for the previous tax year.

• December 31 of the year you turn 71: The last day to contribute to your RRSP before converting it into a Registered Retirement Income Fund (RRIF) or annuity.