Registered Retirement Savings Plan (RRSP) SSJ Financial Services -

Registered Retirement Savings Plan

An RRSP is a retirement savings plan that you establish, and to which you or your spouse or common-law partner contribute. Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan. You set up a registered retirement savings plan through a financial institution such as a bank, credit union, trust, or insurance company (like us). We advise you on the types of RRSP and the investments they can contain.

Some Benefits of opening an RRSP

Contributions are tax-deductible
Savings grows tax-free
You can convert your RRSP to get regular payments when you retire
Contribute to your spousal RRSP which can help reduce your taxes
You can borrow up to $25,000 for a down payment for your first home under the Home Buyers’ Plan (HBP)
You can also take out up to $20,000 to pay for education costs for you or your spouse under the Lifelong Learning Plan (LLP)

Benefits of the Registered Retirement Savings Plan

Here’s how a tax-deferred account like an RRSP works. Let us say you make $70,000 a year and you decide to put the maximum allowable into your RRSP—$12,600. When the tax day comes around, the CRA will treat you as though you earned just $57,400.

Now, tax-deferred doesn’t mean tax-free, and you will eventually have to pay taxes when you withdraw your money years down the line, but by the time you do so, you’ll be retired, your income will almost certainly be smaller and, thus, your tax rate will be lower than it is now

RRSP Contribution Limit

Because RRSPs are registered accounts, they’re subject to certain rules. One of the most important rules concerns the amount of money you can contribute to the account in any given year; it’s either 18% of your past year’s income or a maximum amount, whichever’s smaller. The amount changes, but you can find this year’s and last year’s contribution limit here. You can also catch up if you didn’t max out your investments in earlier years; to find out how much you can contribute, check out the Notice of Assessment that you got after filing your taxes last year. It’s important to remember that even though you might have contribution room left over from previous years, you will not accumulate deduction limits.