RRSP

A very popular investment vehicle when planning for retirement is the Registered Retirement Savings Plan (RRSP). It is very important to emphasize that the RRSP is an investment vehicle like we mentioned before, and not an investment itself. What we mean by this, is that within a RRSP account you can find different kind of investments, such as: bonds, stocks, mutual funds, ETFs, GICs, etc. It is completely up to you to decide what type of investment you want to make.

The yearly contribution limit to a RRSP is 18% of your earned income in the previous year (the annual limit for 2021 is $27 830). Any contribution room not used for any given year accumulates for the years to come. This means that if you didn’t contribute to your RRSP at any given year, the contribution room is available for you today. Withdrawals wont free up a contribution room, once you withdraw from your RRSP you lose those contribution rights.

The contributions to a RRSP can be used to reduce your income tax. Any gains generated by the investments within your RRSP will be exempt from tax as long as the funds stay in the account. Any withdrawal from the RRSP is taxable, this means that the contributions as well as the gains generated by the investments will be taxed when withdrawn.

Ready to open an RRSP account, or want to have more information about it?