By the Sun Life team
An RRSP, how does it work? What are the advantages? We answer your questions!
It’s RRSP season! Don’t have a Registered Retirement Savings Plan (RRSP) yet? Now is the perfect time to get started! Saving in an RRSP allows you to increase your retirement income. But that’s not all. It can also be used to reduce the tax you pay. Here’s how it works.
What is an RRSP?
A Registered Retirement Savings Plan (RRSP) is a savings account that offers unique tax benefits. An RRSP can contain several types of investments (stocks, bonds, mutual funds, etc.). You can contribute money up to your contribution limit.
How does an RRSP work?
All of your RRSP contributions are deductible from your income and grow tax-free. What does it mean? Basically :
Contributions reduce your taxable income. For example, if you earned $50,000 last year and you are entitled to deduct $10,000, you will only pay tax on $40,000.
You only pay tax on your investments when you withdraw your money. Ideally, you won’t have to touch it until retirement. You will then likely be in a lower tax bracket. You’ll pay less tax and keep more of your hard-earned money.
How do you like it? Don’t wait for the March 1 deadline to contribute. The sooner you contribute, the sooner your money will start growing.
What happens if I miss the contribution deadline?
No worries. Your unused contribution room will be carried over to the following year. You can join and contribute to an RRSP throughout the year. You have to make sure you don’t exceed your contribution limit.
Get the answers to your RRSP questions.
Whether you already regularly contribute money to an RRSP or are just beginning to think about it, you may be wondering how to get the most out of your RRSP. Fortunately, we have the answers you need.
We have prepared a 2021 RRSP Guide for you. It’s FREE.
Here you’ll find answers to your questions about RRSPs, including:
What is an RRSP, and what are its benefits?
What is the contribution deadline?
How much can I contribute in 2021?
What is my contribution limit?
Is it profitable to invest in an RRSP all year round?
What is the difference between an RRSP and a TFSA?
What is a Spousal RRSP?
Should I join a group RRSP?
You’ll discover more things you can do with an RRSP that you (maybe) didn’t know about.
Click here to read our 2021 RRSP Guide.
