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.
You won't pay any tax on investment earnings in your RRSP until the income is withdrawn.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.
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.
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".
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.