Registered Retirement Savings Plans! I missed the deadline to talk about these (it was March 3 in 2025) but that’s OK, we can talk about it now to prepare for this year. It’s a bit of a complicated topic but I’m hoping to just highlight a few key details.

What is an RRSP?

A registered retirement savings plan is an account that you open (in Canada) that is registered with the Canada Revenue Agency. Each year, individuals have contribution room for their accounts that they can deposit money into. This money is calculated under the Income Tax Act as a deduction on your income (so when you file your taxes, the amounts you contributed to the plan are deducted before tax is calculated) which could lead to less taxes owing or a higher refund at tax time.

What can you do with it?

The money that you deposit into this account can grow tax free until it’s withdrawn. The amounts can be converted to RRIFs (registered retirement income funds) when you retire and therefore will be taxed at a lower income bracket (in theory you wouldn’t be earning a lot of other income in retirement).

Like a TFSA, the RRSP can be used to buy investment vehicles, GICs, bonds, or just as a savings account, each having their own pros and cons. People who are younger may feel more comfortable with stocks or other riskier investments since they have the luxury of time for the money to grow in case of market corrections.

Common misconception

A common misconception with the RRSP is that you can’t touch it until you retire. That actually isn’t true! The money can be used for the first-time home buyer’s plan or lifelong learning plan but you will have to repay the amounts you borrowed from your RRSP within a certain timeframe.

You can also withdraw money from an RRSP whenever you want. The money is just added to your taxable income and taxed at whatever bracket you’re in. Financial institutions will withhold money from the amounts you withdraw, but if you’re in a low enough tax bracket, you would get a refund.

For more information regarding RRSPs, please visit Registered Retirement Savings Plan (RRSP) – Canada.ca

Disclaimer: This is not financial advice, but merely general awareness information from my own experience. I am not responsible for your finances.