A Registered Retirement Savings Plan (RRSP) is a Canadian savings account designed to help individuals save for retirement. Contributions made to an RRSP are tax-deductible, and the investments grow tax-deferred until withdrawal.
Tax Deductibility
Contributions reduce taxable income, potentially resulting in a lower tax bill for the year they are made.
Tax-Deferred Growth
Investments within the RRSP grow tax-free until withdrawn, allowing for compound growth over time.
Contribution Limits
Annual contribution limits are based on a percentage of earned income, with a maximum limit set by the government. Unused contribution room can be carried forward.
Withdrawal Options
Withdrawals are taxed as income and are typically made during retirement when the individual may be in a lower tax bracket.
Home Buyers’ Plan (HBP)
Allows first-time homebuyers to withdraw up to a certain amount from their RRSP to purchase a home, with repayment required over a specified period.
