The Registered Retirement Savings Plan, commonly called RRSP, is a way to save now to supplement your retirement income later.
It offers you 2 tax advantages:
- Your contributions are deducted from your taxable income.
- The return on your investment is entirely reinvested into your tax-sheltered plan.
Basic RRSP rules
- Your RRSP contributions should not exceed a certain percentage of your income. (see How much can you contribute?)
- There are 4 types of RRSPs: individual RRSP, spousal RRSP, group RRSP and self-directed RRSP. (see What are the types of RRSPs?)
- There are 2 ways to invest: through regular instalments made at your own pace, and cash, at your convenience.
RRSPs are not only for your retirement
They can be used:
- to buy your 1st property with the Home Buyers’ Plan (HBP);
- to pay your return to school with the Lifelong Learning Plan (LLP);
- as a source of revenue in the event of a period of unemployment or parental leave.