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RRSPs 101

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A Registered Retirement Savings Plan (RRSP) is an account, registered with the federal government, that you use to save for retirement.

RRSPs 101

1. Contributions are tax deductible

You claim your RRSP contribution as a deduction on your tax return. Anyone who files an income tax return and has earned income can open and contribute to an RRSP. There are limits on how much you can contribute to an RRSP each year.

RRSPs 101

2. Savings grow tax free

You won’t pay any tax on investment earnings as long as they stay in your RRSP. This tax-free compounding allows your savings to grow faster.

RRSPs 101

3. You can convert your RRSP to get regular

You can transfer your RRSP savings tax free into a RRIF or an annuity when you retire. You’ll pay tax on the regular payments you receive each year — but if you’re in a lower tax bracket in retirement, you’ll pay less tax.

RRSPs 101

4. A spousal RRSP can reduce your combined tax burden

If you earn more money than your spouse, you can help build their tax-free savings by contributing to a spousal RRSP. Retirement income will then be split more equally between the two of you — which may reduce the total amount of tax you pay. Learn more about spousal RRSPs.

RRSPs 101

5. You can borrow from your RRSP to buy your first home or pay for your education

You can take out up to $25,000 for a down payment for your first home under the Home Buyers’ Plan (HBP). You can also take out up to $20,000 to pay education costs for you or your spouse under the Lifelong Learning Plan (LLP). You won’t pay any tax on these withdrawals as long as you pay the money back within the specified time periods.

RRSPs 101

Learn more about RRSPs

Learn how RRSPs work, types of RRSPs and making RRSP contributions on GetSmarterAboutMoney.ca, and see how much you can save using the RRSP Savings Calculator.

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