RRSP is Registered Retirement Savings Plan, which is registered with the federal government of Canada. It can be used as a tax advantageous tool to save up for retirement.
The full form of RRSP is Registered Retirement Savings Plan. It is an investment plan that is registered with the federal government of Canada. Anyone who is below age 71 can commence a RRSP in Canada and can start investing funds for retirement. You can establish a RRSP with any financial institution such as a bank, trust, or an insurance company of your choice.
You can invest in a wide range of financial instruments within an RRSP. They are cash, guaranteed investment certificates, ETFs, mutual funds, shares, corporate bonds, government bonds or a fixed interest.
The contribution limit for taxation year 2022 is 18% of earned income or $29,210 whichever is lower. For example, if your 2021’s earned salary is $49,020 you can contribute up to $8,823. If you earned $100,000 in 2021 you can contribute up to $18,000, whereas if you earned $200,000 in the year 2021, you can contribute a maximum of $29,210.
A retirement plan gives you peace of mind that you have sufficient funds to lead a happy retirement without your monthly or annual salary. Registered retirement savings plan is a tax advantageous retirement tool that every Canadian must make use of.