What is an RRSP? The Complete Guide to Savings Plans in Canada

🏦 What is an RRSP?

An RRSP is a government-registered savings plan in Canada that allows you to save for retirement while getting immediate tax benefits.

✅ RRSP Benefits

1. Tax Deduction Now:

You can deduct your RRSP contributions from your income on your tax return = lower income taxes now.

2. Tax-Sheltered Growth:

Investments inside the RRSP grow tax-free until you withdraw them.

3. Retirement Income:

At retirement, you can convert RRSP into an RRIF or buy an annuity to receive income.

💰 Contribution Rules

• You can contribute up to 18% of your earned income from the previous year, up to a maximum ($31,560 for 2024).

• Unused room carries forward, so you can catch up later.

• CRA tells you your limit on your Notice of Assessment.

🏠 Withdrawing from RRSP – Special Programs

1. Home Buyers’ Plan (HBP)

Use RRSP to buy your first home.

• Withdraw up to $35,000 ($70,000 for a couple).

• No tax at withdrawal (if conditions met).

• Must repay over 15 years (minimum 1/15 each year).

• Missed repayments = counted as income = taxed.

2. Lifelong Learning Plan (LLP)

Use RRSP to go back to school.

• Withdraw up to $10,000/year, max $20,000 total.

• Must be for full-time education for you or your spouse.

• Repay over 10 years.

• No interest, but missed payments = taxed.

🚫 Regular Withdrawals (Non-HBP or LLP)

Fully taxed as income in the year of withdrawal.

The bank withholds tax immediately:

• 10% (under $5,000)

• 20% ($5,000–$15,000)

• 30% (over $15,000)

Plus, you may owe more when filing taxes depending on your income.

❓Do You Pay Interest on RRSP Withdrawals?

• No interest charged on the money you take out.

• But if you don’t repay under HBP or LLP, it’s added to your income and you pay tax on it.

• So it's not a loan from the government – just a tax-free temporary withdrawal, if used correctly.

📘 RRSP Accounts Involved

You can open an RRSP account through:

• Banks

• Credit Unions

• Online brokers

• Insurance companies

Types of RRSP investments:

• Savings accounts

• GICs

• Mutual Funds

• Stocks, ETFs

• Bonds

👥 Who Should Use an RRSP?

• High-income earners who want a tax break now

• People planning to buy a home or return to school

• Long-term savers focused on retirement

👉 Visit TikiTax.ca to learn more or book your free consultation today.