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Registered Retirment Savings Plan

A Registered Retirement Savings Plan (RRSP) is an account that provides tax benefits for saving for retirement in Canada. When investments are placed into an RRSP it becomes tax-deductible from taxable income.

In addition to a RRSP being tax-deductible it also grows on a tax deferred basis, that means that if there are gains such capital gains and interest on the investment, those gains will not be taxed allowing for better compound growth. RRSP Investments will however be taxed when funds are removed from the RRSP and all will be taxed at the same rate regardless of the type of income.

RRSP’s can be set up as follows:
  • Individual RRSP
  • Spousal RRSP
  • Group RRSP

RRSP’s can be cashed out at any time but will be subject to withholding taxes. By age 71 account holders must either cash out or transfer their RRSP to a Registered Retirement Income Fund (RRIF) or to an annuity.

RRSP Withholding Taxes
Amount of RRSP WithdrawalAll Provinces except Quebec
Up to and including $5,000 10%
$5,000.01 to $15,000 20%
More than $15,000 30%

There are special withdrawal programs available. They include the Home Buyer’s Plan (HBP) and the Lifelong Learning Plan (LLP). These plans allow access up to $20,000 or RRSP funds tax-free but with restrictions, the funds must be paid back to the plan in the given time or it will be taxed.

Alliance Financial Group