RRSP
Miles Ahead in Retirement, Invest in Your RRSP Journey Today!
Registered Retirement Savings Plan (RRSP) is a Canadian account designed to help save for your retirement with tax advantages.
Key Benefits:
- Tax Deduction: Contributions will help reduce your taxable income, lowering your tax bill or increasing your refund.
- Tax-Deferred Growth: Investments grow tax-free until withdrawal, usually at retirement.
- Flexible Investments: RRSPs can be invested through different instruments. However, investing through Segregated funds holds unique advantages.
- Contribution Limits: For 2025, contribute up to 18% of last year’s income, to a maximum of $32,490. Unused room carries forward.
- Special Programs: One can use RRSP for the Home Buyers’ Plan (withdraw up to $60,000 for a first home) or the Lifelong Learning Plan (up to $20,000 for education), with repayment required.
- Spousal RRSPs: Higher earners can contribute to a spouse’s RRSP to split retirement income and reduce taxes. Smart move, isn’t it?
RRSPs will help you reach financial milestones like retirement, home ownership, and education, while providing valuable tax benefits. Starting early will surely maximize your savings through compounding and tax deferral.
Frequently asked questions (FAQ)
For 2025, you can contribute up to 18% of your previous year’s earned income, to a maximum of $32,490. If you have unused contribution room from previous years, it carries forward and can be added to your current limit.
You can over-contribute by up to $2,000 in your lifetime without penalty. Any excess above this is subject to a 1% monthly penalty until withdrawn or new contribution room becomes available.
Yes, RRSP contributions are tax-deductible, reducing your taxable income and potentially increasing your tax refund. This makes RRSPs a powerful tool for tax planning and saving for retirement.
Yes, you can name a beneficiary (or successor annuitant, usually a spouse) for your RRSP. This allows the account to bypass probate and ensures that the funds transfer directly to your chosen person, which can simplify estate settlement and may offer tax advantages for spouses.
Yes, you can use your RRSP for the Home Buyers’ Plan (HBP) to buy your first home or the Lifelong Learning Plan (LLP) for education, both allowing tax-free withdrawals if repaid on schedule.
You must convert your RRSP to a Registered Retirement Income Fund (RRIF) or an annuity by the end of the year you turn 71, at which point you begin making withdrawals that are taxed as income.
