RRSP (Registered Retirement Savings Plan)
A registered retirement savings plan (RRSP) is a government-approved account that allows Canadians to plan for retirement. It was first introduced in 1957, RRSPs provide a way for individuals to save and invest their money in a tax-efficient manner. RRSPs are a great way to save. They save you money on your taxes today and allow you to efficiently save for your retirement. By starting early and making steady contributions, you’ll build up a nest egg you can rely on when you reach your golden years.
Canadians are eligible to contribute 18% of their earned income to their RRSP every year, For 2020, your contribution will be limited to 18% of your 2019 earned income, to a maximum of $27,230 plus any carry-forward contribution room that you may have.
Features & Benefits:
» You get a tax deduction— Contributing to an RRSP gives you a deduction that saves you money on your income tax. It may even result in you receiving a tax refund.
» Money grows tax-free—As long as the money remains in your RRSP, all capital gains and dividend/interest income won’t be taxed.
»Tax deferral—Money held in an RRSP (both the contributions and investment gains) won’t be tax-free forever. It will be taxed when you withdraw it, presumably at retirement. However, for most people their marginal tax rate will be lower in retirement, so by deferring the tax until you’re older you will end up paying less.