An RRSP (Registered Retirement Savings Plan) can be a great way for Canadians to save money for retirement. They have various advantages and disadvantages and some of them are discussed below.
First of all, the advantages:
- Your contributions to an RRSP are tax-deductible. You don’t pay tax until you withdraw from it. Hopefully you won’t have to withdraw any of the funds until you retire. Presumably you will be in a lower tax bracket by the time you retire and as a result you will pay less tax.
- Any income or capital gains earned from RRSPs is also tax deferred.
- You can split your retirement income by contributing to a spousal RRSP and as a result your household will pay less tax.
- RRSPs can be transferred from one financial institution to another and you can have more than one.