Registered retirement savings plan

2020 Deadline Date: March 2

What is an RRSP?

RRSP stand for Registered Retirement Savings Plan. It is a tax deferred account that’s registered with the federal government. As the name suggests, RRSPs are intended for retirement savings.

Registered: The government knows you've contributed for tax purposes/savings.

Retirement: The money you put in is withdrawn during retirement

Savings: Not your grocery money

Plan: Your intentional about how much your saving for your future, and for your present.

What’s the benefit of an RRSP?

You can claim the amounts you contribute to your RRSP as a tax deduction. This means you won’t pay tax on this income or the money you earn on your investment until you withdraw those funds.

Plus, by the time you’re ready to withdraw your money in retirement, you’ll likely be taxed at a lower rate than you are now because it will be based on your retirement income. So ideally with an RRSP, you’ll be able to invest more upfront, earn more over the long-term, and pay less tax on those earnings in the end. 

How does an RRSP work?

With an RRSP, you can contribute up to 18 per cent of the income you’ve earned in the previous year, up to an annual maximum that changes each year. In 2019, this maximum is roughly $26,500. You can put RRSP funds into any number of eligible investment products.

What else do you need to know? You can access RRSP funds before your retirement if needed, but there are withdrawal rules and tax implications you’ll need to be aware of before making that decision. You’re also slightly more limited on the types of investments that you can hold in an RRSP versus other products, although there are still plenty of options to allow you to match your investments to your financial goals and your risk comfort level.

Finally, you need to stick within those yearly contribution limits or you’ll be penalized by the CRA.

RRSP FINAL THOUGHTS...

If you can afford to maximize your contributions to an RRSP that’s great! We encourage you to take advantage of this. But if you need to balance your approach to better fit your budget, that’s fine too. 

There are many different things you’ll need to consider when deciding how much to invest through a RRSP, like your age, current income, other sources of retirement savings and, of course, the personal financial goals you want to achieve. 

When you’re ready, our Wealth Advisors are here to help. Remember -- they exist to help your wealth grow, and they’re excited to work with you to explore options and opportunities to meet your unique needs. 

Together, we’ve got this.

If you have any more questions or comments we'd love to hear from you.