Registered Retirement Savings Plan (RRSP)

Start Early

Invest Regularly

Consider Foreign Content

Open a Spousal Plan

RRSP Loans

RRSP Calculator RSP Application Download an RSP Loan application package Use Your RRSP

An RRSP is one of the most effective tools Canadians can use to build their retirement nest egg. The money contributed to an RRSP is tax deductible and the income accumulated will grow tax-free until withdrawn from the plan. A variety of investments can be held in an RRSP, including mutual funds, GICs, stocks, bonds and cash.

RRSP Basics

Contribution Deadline for 2007 Tax Year: February 29, 2008.
Contribution Limit for 2007: 18% of earned income to a maximum of $19,000, less any pension adjustment, plus any carry forward of unused contributions. Your contribution limit appears on your Canada Revenue Agency Notice of Assessment (CRA).
Tax Penalty on Over-Contributions: you are subject to a penalty of 1% per month on the portion of your RRSP contribution that exceeds your lifetime over-contribution limit of $2,000.
Carry Forward of Unused Contribution Room: if you did not maximize your RRSP contribution in any year since 1991, you may carry forward the unused room to future years, subject to certain restrictions. This amount will be included on your CRA Notice of Assessment.
Age Limits: you may contribute to an RRSP until the end of the year in which you turn 71. At this time, you must redeem the RRSP, purchase an annuity, or transfer it to a registered retirement income fund (RRIF).
Withdrawals: when redeeming units from an RRSP, the withdrawal will automatically be reduced by the appropriate amount of withholding tax. The table below indicates the amount of tax that will be withheld at source on RRSP withdrawals, as prescribed by Canada Revenue Agency (CRA).

RRSP Withdrawals	All Provinces Except Quebec	Quebec
Up to $5,000	10%	21%
Over $5,000 to $15,000	20%	26%
Over $15,000	30%	31%

Start Early

Many individuals wait too long to start investing and fall short of the funds required to provide a comfortable retirement. The biggest advantage when investing is time. Start Early. The earlier you start making regular RRSP contributions, the more your savings will grow thanks to compounding.

How Compounding Works

Invest Regularly To top

Periodic investing is a convenient way to work retirement planning into your budget. Make regular monthly contributions through an Automatic Investment Plan (AIP). Not only will the value of your investments grow with regular contributions, but your accumulated balance will benefit from compounding. An AIP also allows you to take advantage of the ups and downs of financial markets through dollar cost averaging.

Consider Foreign Content To top

International markets offer excellent return potential and diversification benefits for your RRSP.

Open a Spousal Plan To top

A spousal RRSP is almost identical to a regular RRSP, with one exception: the plan is registered in one spouse's name, while the contributing spouse takes full advantage of the tax deductibility of contributions. The primary function of a spousal RRSP is to reduce the overall tax burden of a household during retirement through income splitting. A spousal RRSP is appropriate when one spouse anticipates a relatively low income during retirement, while the other expects a significantly higher income. A spousal RRSP should be registered in the lower income spouse's name, with the higher income spouse named as the contributor.

RRSP Loans To top

The sooner you start making regular RRSP contributions, the more your savings will grow thanks to the power of compounding. We’ve compared two similar investors pursuing different strategies: Sarah and Connor. Both are 40 years old and have $400 available each month to invest in their RRSP, with the goal of retiring at age 65.

RRSP Loan Sarah	Automatic Investment Plan Connor
Sarah borrows $28,400, and uses the resulting tax refund ($11,360, assuming a 40% tax rate) to pay down the loan, which reduces the outstanding balance to $17,040. Sarah will make monthly payments of approximately $400 over four years to repay the loan.	Connor uses his $400 to start a monthly Automatic Iinvestment Plan, contributing the resulting tax refund (assuming the same tax rate as Sarah) each year to his RRrrSP.

Although both Sarah and Connor started out in similar situations – identical monthly payments, rate of return, and length of time invested – Sarah’s strategy was more successful. Even though Sarah had to pay back her loan with interest, her was 22% greater than Connor’s.

Find out if an RRSP loan is right for you. To help determine how much your current savings will be worth, and how much in future contributions you'll need to fund your desired retirement lifestyle, use our RRSP calculator.

Or, you can also do one of the following: