Registered Retirement Savings Plan (RRSP) is a program regulated by the federal government of Canada, offering tax advantages to help Canadian residents accumulate financial wealth, through a wide range of investment instruments, in order to provide financial security and income during retirement.
Most people have heard of RRSP’s although not everyone is sure what they are or how they work. Some people think of RRSPs as an investment and will say ‘ I bought an RRSP’ or ‘I don’t like RRSP’s because they lose money’. RRSPs are just registered savings accounts, a baskets to hold investments where contributions are deducted from your taxable income and growth is sheltered from income tax until withdrawal. Sometimes RRSPs are promoted as the ‘must have’ or ‘be all’ in tax savings and retirement planning. Sometimes clients are encouraged to borrow to fund RRSP contributions although it may not be in the best interest. Clients should have consultation with a professional to determine if RRSPs are the best course of action for their individual situation.