Is RRSP a good idea for Canadians?

  • Asked By
  • Updated On:
    29-Nov-2022
  • Replies:
    1

Short Answer

In general, RRSP is a good idea to grow retirement money in a tax- advantageous way. Let's get more insights on the Registered Retirement Savings Plan in Canada.

Detailed Answer

What is RRSP Canada?

RRSP is a retirement savings tool for Canadians that was established in 1957 under the Income Tax Act of Canada. This investment account is registered with the federal government of Canada and is supervised by the Canadian Revenue Agency (CRA).

Is RRSP a good idea for Canadians?

An RRSP is a good idea:

  1. If you are looking to grow your money in a tax-advantageous retirement tool. The income returns, interest, dividends and capital gains are not taxed within RRSP until it's withdrawn. The contribution limit of TFSA is only $6,000 per annum whereas it goes upto $27,830 per annum in a RRSP (depending on your earned income).
  1. If you are looking to reduce your tax bill, then you can contribute into RRSP, as the contributions made can be deducted from the assessable income. For example, if your marginal tax rate is 33%, then for every $1,000 you put into RRSP, you can save $330. Imagine you earn $200,000, you can contribute up to $29,210 which will save upto $9,639 in your taxes. It is notable that TFSA does not offer tax deductions for contributions made.
  1. If you are planning to buy your first new home in the near future, RRSP is a great tool. You can drawdown upto $35,000 for this purpose, without being taxed
  1. If you are aiming high for a quality education, you can draw down upto $20,000 from your RRSP, whiteout coming under the tax radar.

RRSP for Canadians

Thus, saving money is always a good habit, unless it hampers your current lifestyle. The sooner you start a RRSP, the better your retirement lifestyle is expected to be.

Please note we have listed the general suitability and advantages of RRSP. However, it is important that you consult your tax advisor or financial planner, if you are looking to save up for a significant life event.

Tagged With: rrsp for canadiansis rrsp goodrrsp goodregistered retirement savings planrrsp canada
Categories: RRSP
Ask Your Query for FREE, Get quick answers from our FINTRAKK community!
Discussion (0)
Related FAQs
Is TFSA Canada a good idea?

Yes, opening a Tax Free Savings Account or TFSA surely seems to be a good idea. In fact, TFSA is good for a person who is 18 years or above and is looking for long term investment.

Who is eligible for RRSP in Canada?

Any Canadian resident who has an earned income and is below age 71 can open a RRSP. Let's grab some more useful details on who is eligible for RRSP in Canada.

How do RRSP Canada work?

RRSP is a tax advantageous retirement savings vehicle that is registered with the federal government of Canada. Continue reading to find out how it the Registered Retirement Savings Plan works.

What are the best Wealthsimple alternatives in Canada?

There are various online brokerage platforms in Canada. We believe that Questrade, Scotia iTrade and CIBC investor's edge are the best alternatives to Wealthsimple.

What are the best Questrade alternatives in Canada?

Based on our analysis Wealthsimple is a good alternative to Questrade for its cost effectiveness and Qtrade is a good alternative for Questrade for its customer services and research tools.

Is Virtual Brokers good?

Like every other trading platform Virtual Brokers has its pros and cons. Read more to find out if the platform suits you. See if Virtual Brokers is good.

Is it better to put money in RRSP or TFSA?

Choosing between TFSA and RRSP depends on various factors such as your goals, time frame of investment, your marginal tax rate, age etc. Discover the similarities and differences between TFSA vs. RRSP Canada.

Which is the best bank for RRSP?

Based on our analysis of interest rate, fees charges, ease of managing the account and safety of funds, EQ bank is the best option in Canada to open a RRSP account.

Can you trade options on Wealthsimple?

Yes, now you can trade options through the Wealthsimple platform. Options trading is only available on the latest version of the Wealthsimple mobile app in your DIY accounts. You'll be able to buy or sell options in any of your self-directed trading accounts through the Wealthsimple mobile app. The best part is, there is no minimum account balance required.

Is Virtual Brokers safe?

Yes, Virtual Brokers is a safe online trading platform. Let's analyze the safety and security features that make the Virtual Brokers a popular platform.