The Registered Retirement Savings Plan was introduced to Canada in 1957, as a means to introduce to the plan a feasible and working plan, which would help them after they retire. If you apply for a Registered Retirement Savings Plan, then every month, a sum of money is deducted from your total income, and is transferred to the RRSP. Depending on whether you work for twenty or thirty years, by the time you retire, you will usually have a lump sum, which will be available for your use.
What Is An RRSP?
An RRSP can be in the form of any investment. Not only a cash account, they can also be in the form of stocks, bonds, mutual funds, shares, income trusts, foreign currency, and labour sponsored funds. There are different rules for RRSP accounts, depending on the bank that you use. The amount that you can put in the account at a time, and the duration of these deposits, is all determined separately by different banks. For the best plan for you, it is advisable that you do all the necessary research, before settling on a bank. Usually, you will be able to access all the amount in your account by the time you reach 71 years of age.
Your RRSP account is never taxed during the years when you are depositing to it. Once you have retired, you can claim the entire amount as a lump sum. However, there is a certain tax that comes with this withdrawal. Overall, your taxation amount would be much less than if you were paying taxes with your total income.