The Registered Retirement Savings Plan (RRSP)

The Registered Retirement Savings Plan is a type of savings plan that is available to Canadian residents. This type of plan is similar to the 401k or other tax advantaged retirement accounts. By using this type of account, individuals can hope to increase the amount of money that they can save for retirement. Here are a few things to consider about the Registered Retirement Savings Plan and how it works.

Registered Retirement Savings Plan

Individuals who choose to invest in this type of retirement plan can take advantage of two large tax benefits. First of all, the amount of money that they contribute is deducted from their taxable income. This lowers the amount of taxes that they have to pay for the year. It also allows them to contribute more money to their retirement plan than they would otherwise be able to do. 

The other tax benefit is that they allow the returns from the investments in the account to grow on a tax-deferred basis. This allows the returns to compound at a faster rate. The money that is generated from returns stays in the account and continues to grow.


Once you contribute money to your account, you can use that money to invest in different securities. Investors can put their money into stocks, bonds, mutual funds, guaranteed investment contracts, and other types of securities. As mentioned earlier, any of the returns that you get from these types of investments can continue to grow tax free. This amplifies the amount of money that you have available for retirement.

Paying Taxes

With the Registered Retirement Savings Plan, investors will not have to pay taxes until they retire. With this particular plan, they can start to receive withdrawals once they retire. At that point, the individual will begin paying taxes on the income that they receive. When they retire, they will most likely be at a lower income tax bracket than they would've been when they were working. This allows them to save money on taxes even further.

Types of RRSP

There are three different types of Registered Retirement Savings Plan options that you could get involved with. You can actually set up an individual account that is just for you. You can also set up an account that is for you and your spouse. Employers can also set up this type of account for all of their employees as a group plan.

Withdrawal Programs

Even though the main objective with this particular plan is to provide money for retirement, it can also be used for a few different purposes. In certain circumstances, individuals can withdraw the money without paying any taxes on it. They will have to repay the loan with interest at a certain point in the future. For example, they have a Home Buyer's Plan that allows people to withdraw as much as $20,000 to purchase a home. They can also withdraw as much as $20,000 to pay for college tuition. 

blog comments powered by Disqus