Registered Retirement Savings Plan (RRSP)

Save Money for Retirement in a Tax Efficient Manner

Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan (RRSP) is a government-regulated investment account with special tax benefits to help you maximize your retirement savings. Deductible contributions to an RRSP help reduce your taxes, and any income you earn on your investments while in the plan grow tax-deferred. How much you can contribute depends upon your previous years’ income. But how much you ‘should’ contribute depends on your current year’s income to make sure you reduce your Marginal Tax Rate (MTR) to the next bracket and utiize the unused room for next year.

Speak to your financial planner to determine what is best for you and is affordable also.

Benefits of RRSPs:

Your RSP is an investment account, and can contain a variety of investments
Your annual contributions (up to your annual limit) can be deducted from your earned income, reducing the amount of income tax you pay that year
When you withdraw money at retirement, you may benefit from a lower tax rate
Funds in an RRSP are eligible for Canadian Government programs that can help you buy your first home (Home Buyer’s Plan), or pay for further education (Lifelong Learning Plan LLP)

How Much Can you Contribute:

Anyone who files an income tax return and has earned income can open and contribute to an RRSP. There are limits on how much you can contribute to an RRSP each year. You can contribute the lower of:

18% of your earned income in the previous year, or
the maximum contribution amount for the current tax year is posted each year by CRA

If you are a member of a pension plan, your pension adjustment will reduce the amount you can contribute to your RRSP.

You can carry forward your unused contribution room.