RRSP
Tax deduction now, tax paid later.
What it is
A registered account that gives a tax deduction when you contribute.
Best for
Higher income years + long-term retirement investing.
Watch for
Withdrawals are taxable and can reduce some benefits.
Quick take
- Contributions can reduce taxable income.
- Investments grow tax-deferred.
- Withdrawals are taxed as income.
- Good for retirement + tax planning.
Key terms
- Contribution room: your limit to add.
- Deduction: lowers your taxable income.
- Tax-deferred: tax later, not now.
- Withholding tax: taken at withdrawal time.
Pros
| Topic | Notes |
|---|---|
| Tax deduction | Contributions may lower your taxes today. |
| Tax-deferred growth | No tax while it grows inside the RRSP. |
| Retirement-focused | Often best when you’ll be in a lower bracket later. |
| Employer match | If available, it’s usually “free money.” |
Cons
| Topic | Notes |
|---|---|
| Taxable withdrawals | Withdrawals are taxed as income. |
| Less flexible | Early withdrawals can create permanent room loss. |
| Withholding tax | Tax is withheld immediately when you withdraw. |
| Benefit impacts | Income from withdrawals can affect credits/benefits. |
Educational content only — not financial advice.