What is an RRSP?
A Registered Retirement Savings Plan (RRSP) is a type of savings account designed to help Canadians save for their retirement. Contributions to an RRSP are tax-deductible, and the income earned within the account is tax-deferred until withdrawn.
Benefits of an RRSP
- Tax-deferred growth on investments
- Tax deductions for contributions
- Helps in long-term retirement planning
How to Open an RRSP
Opening an RRSP is straightforward. You can set one up with most financial institutions in Canada, including banks, credit unions, and online brokers. Be sure to research the options to find the best fit for your financial goals.
Contribution Limits
The contribution limit for an RRSP is based on your earned income, up to a maximum amount set annually by the government. For 2024, the maximum contribution limit is $31,560 or 18% of your earned income, whichever is lower. Unused contribution room can be carried forward to future years.
Withdrawals and Taxes
Funds withdrawn from an RRSP are subject to income tax, with some exceptions like the Home Buyers’ Plan (HBP) and the Lifelong Learning Plan (LLP), which allow for tax-free withdrawals under specific conditions.