Registered Retirement Savings Account (RRSP)

An RRSP is an account designed to help you save for retirement. Your money inside the RRSP can be used to purchase a variety of investments including, mutual funds, segregated funds, stocks, bonds, guaranteed investment certificates (GIC) and others. These investments within your RRSP are all tax-sheltered, meaning you do not pay any interest on the dividends, or capital gains. 

There are limitations to the amount of money you can contribute to the RRSP and any given year. For 2018, the maximum contribution amount is 18% of your income or  $26,230 whichever is smaller. If you do not maximize your contribution, they are carried forward, to find out your contribution amount check your notice of assessment. 

Any contributions are pre-tax income, meaning you can subtract the contribution amount from your income at tax time. For example, if you made $60,000 and contributed $5,000 to your RRSP, you only pay tax on $55,000. When you withdrawal the money you will have to pay taxes, but at retirement, you will hopefully be in a lower tax bracket. Lastly, your RRSP must be converted to a Registered Retirement Income Fund (RRIF) or Annuity the year you turn 71. 

There are some benefits to owning an RRSP such as the Home Buyers Plan (HBP), which allows you to withdrawal tax-free up to $20,000 for the purchase of your first home. There is also the Lifetime Learning Plan (LLP), allows you to withdrawal up to $10,000 in a given year, or $20,000 total, towards your education.

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