An RRSP is a government-sponsored savings plan designed to encourage Canadians to save for their retirement by offering attractive tax benefits that allow your savings to grow much faster than they otherwise would. The tax benefits of RRSPs come in two forms:
You can hold a variety of savings and investment types in an RRSP, such as mutual funds, Guaranteed Investment Certificates, bonds, equities and many more. To find out more, speak to a financial planner or advisor.
There are four basic types of RRSPs:
|Type of RRSP||Description||For more information|
|Basic (Individual) RRSP||
||Canada Revenue Agency – Registered Retirement Savings Plan|
|Spousal or common law partner RRSP||
||For more detailed information on income splitting, visit the Canada Revenue Agency website.|
||Canada Revenue Agency – Self-directed RRSPs|
You can set up an RRSP (with the exception of group RRSPs) through a financial institution such as a bank, credit union, trust or insurance company.
If you are considering opening an RRSP with a federally regulated financial institution, you have the right to be informed about key details before the plan is set up. See Your right to information: registered plans (RRSPs, RESPs, TFSAs, RDSPs, RRIFs).
The maximum amount you can contribute to an RRSP depends on your income and how much you contributed in previous years. It is called your deduction limit. You are allowed to contribute 18 percent of your previous year’s income, up to a maximum amount. For 2013, the maximum deduction limit was $23,820.00. However, if you didn’t contribute the maximum in previous years, your deduction limit will be higher. If you contribute to a pension plan at work, your deduction limit will be lower.
After you file your tax return, you’ll receive a Notice of Assessment from the Canada Revenue Agency (CRA), which will indicate your new RRSP deduction limit. For more information on contribution limits and how the CRA determines your deduction limit, visit the CRA website.
Ideally, you want to contribute to your RRSPs as early as possible to maximize the amount of time your savings can grow and compound.
March 1 of the current year is the deadline for contributing to an RRSP for the previous tax year.
December 31 of the year you turn 71 years of age is the last day you can contribute to your own RRSP.
You can withdraw money from your RRSPs at any time but you will have to pay taxes on what you withdraw. RRSPs are a long-term savings tool designed to help you save for retirement. Unless you have no other options available, you should not withdraw from your RRSP until retirement.
There are two exceptions where you can withdraw from your RRSP tax-free. They are:
For more information on ways to help you save for your children’s education, see our tip sheet on Registered Education Savings Plans.