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RRSPs 101

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

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, up to a certain amount depending on your income or Canada Revenue Agency (CRA) limits.

RRSPs 101

#2: Savings grow tax free

You won't pay any tax on investment earnings in your RRSP until the income is withdrawn. This tax-free compounding allows your savings to grow faster.

RRSPs 101

#3: You can convert your RRSP to get regular payments when you retire

You can convert your RRSP savings tax free into a Registered Retirement Income Fund (RRIF) or an annuity when you retire to receive regular income. You'll pay tax on the withdrawals you make or payments you receive — but if you’re in a lower tax bracket in retirement, you’ll pay less tax than you would in your earning years.

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. Commonly referred to as "income splitting".

RRSPs 101

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

You can borrow up to $25,000 for a down payment for your first home under the Home Buyers’ Plan, and up to $20,000 to pay education costs for you or your spouse under the Lifelong Learning Plan. You must pay back what you borrow within specific time periods.

RRSPs 101

Learn more about RRSPs

Learn how RRSPs work, RRSP fees, 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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