What exactly is an RRSP? Watch even if you think you know!
This is a quick example of the type of things we'll be doing with our video glossary.
An RRSP, or Registered Retirement Savings Plan, is a retirement savings and investment account that the Canadian government introduced to encourage people to save for retirement. Here are the key features of an RRSP:
1. Tax-Deferred Growth: Contributions to an RRSP are tax-deductible, meaning they can reduce your taxable income for the year you contribute. The investments within the RRSP grow tax-free until they are withdrawn.
2. Contribution Limits: There is a maximum amount you can contribute to your RRSP each year, which is based on your earned income and subject to an annual limit set by the government. Unused contribution room can be carried forward to future years.
3. Types of Investments: RRSPs can hold a wide variety of investments, including stocks, bonds, mutual funds, ETFs, and GICs (Guaranteed Investment Certificates).
4. Withdrawals: Withdrawals from an RRSP are considered taxable income. Withdrawals made before retirement are generally discouraged due to the tax implications and potential withholding taxes, except under specific circumstances like the Home Buyers' Plan (HBP) and the Lifelong Learning Plan (LLP), which allow for temporary, tax-free withdrawals.
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