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What is an RRSP and Why Should You Have One?

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The Registered Retirement Savings Plan (RRSP) is Canada’s most popular retirement savings product for a reason.


What is an RRSP?

Introduced in 1957, Registered Retirement Savings Plans (RRSPs) are government-registered investment accounts designed to help Canadians save for retirement.

Contributions to an RRSP are tax deductible, which can reduce what you pay on your income tax.

Who can invest in an RRSP?

Any Canadian with an employment income and files a tax return may set up and contribute to an RRSP, or have a guardian set one up and contribute on their behalf.

You can invest into your own RRSP yourself, and you may also contribute to the RRSP of your spouse or common-law partner.

The maximum age to contribute to an RRSP is 71. At that time, the individual must close down their RRSP at the end of the calendar year and either withdraw the money for retirement, purchase an annuity, or convert it into a Registered Retirement Income Fund (RRIF) to continue to earn interest while using the funds for retirement income.

Why is an RRSP such a good choice for retirement investments?

Within your tax-free RRSP account, your contributions can still be used to purchase investments such as GICs, mutual funds, bonds, stocks, ETFs, and more.

As long as your investment funds remain in your RRSP, any income, interest, or gains earned from investments within the account are also tax-deferred until a withdrawal is made.

What happens if I withdraw funds from my RRSP?

Any funds withdrawn from your RRSP will be treated as taxable income.

How much can I contribute to my RRSP?

The Government of Canada sets limits on how much you can contribute to RRSP for each year. For the 2021 tax year, the maximum contribution is 18% of your earned income on your previous year’s tax return, or $27,830, whichever is less.

The easiest and most accurate way to see your exact contribution limit and carry-forward contribution room is to log in to your Canada Revenue Agency (CRA) or check your most recent Notice of Assessment.

Is there an annual deadline to contribute to an RRSP?

The deadline for the 2021 tax year is March 1st, 2022. You may make dedication-eligible contributions throughout the specific tax year, or up to 60 days into the following year.



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