A Registered Retirement Savings Plan (RRSP) is a powerful tool for Canadians to save for retirement while reducing their current tax burden. Contributions are tax-deductible, and your investments grow tax-deferred until withdrawal.
Key Benefits of an RRSP
Tax Deductions: RRSP contributions reduce your taxable income for the year, potentially putting you in a lower tax bracket.
Tax-Deferred Growth: Your investments grow tax-free inside the RRSP until you withdraw them in retirement.
Lower Taxes in Retirement: Most people have lower income in retirement, so withdrawals are taxed at a lower rate than when you contributed.
RRSP Contribution Limits
- 18% of your previous year's earned income
- Maximum annual limit set by CRA (check current year limits)
- Unused contribution room carries forward indefinitely
Special RRSP Programs
Home Buyers' Plan (HBP): Withdraw up to $35,000 tax-free for your first home purchase. Repay over 15 years.
Lifelong Learning Plan (LLP): Withdraw up to $10,000 per year (max $20,000) for full-time education or training.
RRSP Investment Options
- Stocks and equities
- Bonds and fixed income
- Mutual funds and ETFs
- GICs (Guaranteed Investment Certificates)
- Segregated funds with insurance protection
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