- RRSPs
D'Costa Financial Group
A Registered Retirement Savings Plan (RRSP) is one of the most popular structures in Canada that can help you save for retirement while lowering your income taxes. In Canada, you are required to pay taxes on the money you earn. However, the core advantage of an RRSP is that any money or investment you contribute into the plan can help reduce your taxable income. You are only taxed on the contributions and earned income when you take the money out of the plan
How does an RRSP help you reduce taxes?
To start with, contributions to RRSPs may be deducted from income before calculating income tax due. Money may be withdrawn from an RRSP in tax years when one is in a lower income-tax bracket because of lower income (due to retirement, unemployment, etc.) than tax years when one makes contributions. Lastly, income earned within the account is not taxed until money is withdrawn from the plan itself. This allows the plan to grow faster than a similar investment; if they were to be made outside the plan.
RRSPs are designed to help you save for the long-term, however in an emergency you are able to take out the money. Therefore, you don’t have to wait for retirement to take money out of your RRSP but be advised that if you take out any money from your RRSP before you retire, you will have to pay tax on this amount.
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