What is RRSP in Canada?

1 min read | February 28, 2023 05:21 AM EST | By Team Kalkine Media

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RRSP stands for Registered Retirement Savings Plan. It is a type of savings account that is registered with the Canadian government and designed to help Canadians save for retirement.

The amount of your taxable income for the year in which you make an RRSP contribution is reduced since RRSP contributions are tax deductible. Any investment income made inside an RRSP is tax-deferred, meaning you won't have to pay taxes on it until you take the money out of the account.There are contribution limits to RRSP accounts, which are based on a percentage of your earned income. The maximum contribution limit for the 2022 tax year is $29,210, or 18% of your earned income from the previous year, whichever is lower.

RRSP withdrawals are taxable and must be reported as income on your tax return. There are several exceptions to this rule, such spending the money to pay for a first home or continuing your education.Overall, an RRSP is a popular savings vehicle in Canada for retirement planning, as it allows individuals to defer tax on investment income and potentially reduce their tax bill in the year of contribution.

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