Registered Retirement Savings Plan (RRSP) (2024)

FAQs

Who is eligible for RRSP in Canada? ›

Who is Eligible to Contribute to an RRSP? The simple answer is a Canadian resident for tax purposes who is 71 years or younger and making an income, up to the individual's annual contribution limit.

An RRSP is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan.

The key difference between an RSP and an RRSP is that the term RSP is used prior to it being registered with the Canada Revenue Agency (CRA). Once the RSP is registered with the CRA, it is called a Registered Retirement Savings Plan (RRSP).

The 4% rule for retirement budgeting suggests that a retiree withdraw 4% of the balance in their retirement account(s) in the first year after retiring, and then withdraw the same dollar amount, adjusted for inflation, every year thereafter.

An RRSP is a great retirement savings vehicle for dual citizens, expats and Canadians. One should not transfer an IRA to an RRSP.

Yes, US citizens can maintain or open new RRSP accounts while living abroad, provided they have earned income that is subject to Canadian tax. It's essential, however, to consider the tax implications in both Canada and the US.

There is less freedom in how you can withdraw from an RRSP, compared to a TFSA. Withdrawals are classed as taxable income (unlike TFSA withdrawals). Low-income earners pay a low rate of income tax, so RRSPs don't make financial sense for this kind of investor (a TFSA would probably be a better option).

You can make a withdrawal from your RRSP any time¹ as long as your funds are not in a locked-in plan. The withdrawal, however, is subject to withholding tax and the amount also needs to be included as income when filing your taxes. There are situations in which tax-deferred withdrawals can be made from your RRSP.

The maximum contribution you can make to your RRSP is 18% of your previous year's income or the current fixed contribution limit ($31,560 for 2024).

Which bank has the best RRSP? ›

All your RRSP information—including contributions made, earned, carried forward, deducted, and your total contribution room for the coming year—can be found on the Notice of Assessment you receive from the CRA, or online in your CRA My Account.

The $1,000 per month rule is designed to help you estimate the amount of savings required to generate a steady monthly income during retirement. According to this rule, for every $240,000 you save, you can withdraw $1,000 per month if you stick to a 5% annual withdrawal rate.

a debt, share of, or an interest in, a corporation, trust or partnership in which the holder of the RRSP has a significant interest; a debt, share of, or an interest in a person or partnership with which the holder of the RRSP does not deal at arm's length; or.

The 50/30/20 rule is a budgeting technique that involves dividing your money into three primary categories based on your after-tax income (i.e., your take-home pay): 50% to needs, 30% to wants and 20% to savings and debt payments.

Salary or wages from employment. Deductible employment-related expenses such as union or professional dues reduce this amount. Disability pensions paid under the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) (you must reside in Canada when you receive the payments), and taxable income from a disability plan.

RRSP Account Holders

However, to benefit from the deferral of taxes upon your death, the named beneficiary of your RRSP must be: Your spouse or common-law partner; A financially dependent child or grandchild under 18 years of age; or. A financially dependent mentally or physically infirm child or grandchild of any age.