What is an RRSP?

A registered retirement savings plan (RRSP) is a personal savings account that has special tax advantages. RRSPs can hold a variety of qualifying investments, including treasury bills, guaranteed interest products, mutual funds, segregated fund contracts, bonds and equities. As well, some types of investment contracts, such as registered guaranteed investment fund contracts, are themselves RRSPs.

An RRSP is such a powerful savings vehicle because your contributions are tax deductible, and the taxes on any investment growth are deferred until you take your money out. Taxdeductible contributions mean you'll have more of your income available for your current needs, even while you're saving for the future. And tax-deferred investment growth (interest, dividends, capital gains) keeps more of your money working for you. When you withdraw money from your RRSP, it is taxed at your tax rate at the time you take it out. But if you're like most people, you'll be retired when you start to take withdrawals, so your tax rate will likely be lower than when you were employed, and you'll be able to keep more of your hard-earned money.

You should consider an RRSP if:

• You want to save money for retirement and be able to deduct your contributions from this year's income
• You're looking to reinvest your tax savings
• You want to use your tax savings to pay down non-tax-deductible debt, like your mortgage

RRSP contribution limit

RRSP contributions can lead to good news at tax time, because they’re deductible. But everything has its limits, including your RRSP. The CRA tells you your RRSP contributing room in the tax assessment you get after filing your tax return each year. Although you could calculate your contributing room by yourself, it’s easier to rely on the CRA’s calculation. Generally, you’re allowed to contribute up to 18% of your previous year’s earned income, to a maximum set each year by the Income Tax Act and Regulations, plus any unused contributing room carried forward from prior years.

Quick Facts about RRSPs

• You can contribute to an RRSP if you earn income, are under age 72 and are a Canadian citizen.
• RRSP contributions reduce your taxable income and your savings are not taxed until you withdraw them at retirement, when you will most likely be in a lower tax bracket.
• You can borrow up to $25 000 from your RRSP to make a down payment on your first home through the federal government's Home Buyer's Plan.

For more information on Individual, Spousal and Group RRSPs, contact us at 780-425-4058 or
Read more on RRSP questions in Our February Newsletter

Ten common RRSP mistakes