Registered Retirement Savings Plan
RRSP
A tax-deferred savings account designed to help Canadians save for retirement.
What is an RRSP?
A Registered Retirement Savings Plan (RRSP) is a tax-advantaged account that helps Canadians save for retirement. Contributions are tax-deductible, meaning they reduce your taxable income in the year you contribute. Investments grow tax-free inside the account, and you pay tax only when you withdraw funds, ideally in retirement when you may be in a lower tax bracket.
Why It Matters for Newcomers
Once you start earning income in Canada, an RRSP becomes a powerful tool for reducing your tax burden and saving for the future. Your RRSP contribution room is 18% of your earned income from the previous year, up to an annual maximum. You can also use the RRSP Home Buyers' Plan to withdraw funds for purchasing your first home.
Key Features
Your contribution room carries forward if unused. The Home Buyers' Plan allows you to withdraw up to $60,000 tax-free for a first home purchase, which you repay over 15 years. The Lifelong Learning Plan allows withdrawals for full-time education. Contributions made by December 31 or within the first 60 days of the next year count for the previous tax year.
Quick Tip
If your employer offers RRSP matching, contribute at least enough to get the full match. This is essentially free money. For newcomers in lower tax brackets, a TFSA may be more beneficial initially, since you do not get as much benefit from the RRSP tax deduction when your income is lower.