IS RRSP right for me?
Most working individuals, who file an income tax return, should consider opening a RRSP since they offer numerous benefits:
- RRSP contributions are tax deductible; individuals can reduce their annual tax bill by contributing to an RRSP.
- In a situation where a spouse earns more income than their husband/wife, they can reduce their combined tax burden by utilizing a Spousal RRSP. Additionally, couples can use income splitting during retirement to help reduce their taxes when they withdraw their retirement funds.
- For many Canadians the RRSP will be their main source of retirement funding.
- The RRSP is also a good savings tool; since money is contributed tax deferred it is taxable upon withdrawal, reducing the incentive to dip into your retirement savings early.
- RRSPs are a good tool if you expect your retirement income to be less than your current working income. The funds withdrawn in retirement will be taxed in a lower tax bracket.
If you are trying to decide between contributing to the TFSA over your RRSP please take a moment to review our presentation on RRSP vs. TFSA