It’s best to leave your RRSP where it is until you retire. But there are a few reasons you may cash your RRSP in early.
December 16, 2020
What is an RRSP? (video)
Find out, in simple terms, what an RRSP is and how it can help you save for retirement.
What is an RRSP?
Simply put, a Registered Retirement Savings Plan, or RRSP, is a type of savings account that helps Canadians save for their retirement.
How does an RRSP work?
You can hold a variety of investments in your RRSP, like:
- stocks,
- bonds,
- GICs, and
- mutual funds.
Any contributions or growth within your RRSP help you defer taxable income. This means you can defer taxes this year when you contribute, and defer taxes on any investment growth, until you choose to access the funds. For most, withdrawing from your RRSP at a later point in life means paying less tax.
Think of it this way: you’ll probably be in a lower tax bracket when you’re retired in your 60s or 70s. So you’ll be paying less tax when you withdraw from your RRSP at that age.
What’s your RRSP contribution limit?
Your yearly contribution limit is 18% of your earned income, plus unused room from earlier years. Any money you put into an RRSP, up to the limit, reduces your taxable income for that year.
Your RRSP contribution limit is calculated each year and will appear on the Notice of Assessment you receive after filing your taxes.
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What is an RRSP?
Simply put, a Registered Retirement Savings Plan, or RRSP, is a type of savings account that helps Canadians save for their retirement.
How does an RRSP work?
You can hold a variety of investments in your RRSP, like:
- stocks,
- bonds,
- GICs, and
- mutual funds.
Any contributions into your RRSP, and any growth within your RRSP, help you defer taxable income. This means you won’t have to pay taxes on your contributions or any investment growth until you withdraw funds. For most, withdrawing from your RRSP at a later point in life – in your 60s or 70s – means paying much less tax.
- What happens when you withdraw money from your RRSP early? Here’s a look at the hidden costs of early RRSP withdrawals.
Think of it this way: you’ll probably be in a much lower tax bracket when you’re retired in your 60s or 70s. So you’ll be paying less tax when you withdraw from your RRSP at that age.
- An RRSP is a great way to save for retirement. But there are other ways you can use your RRSP to achieve your goals. Here are 6 things you may not know you can do with your RRSP.
What’s your RRSP contribution limit?
Your yearly contribution limit is a percentage of your earned income plus unused room from earlier years. Any money put into an RRSP, up to the limit, reduces your taxable income for that year.
Your RRSP contribution limit is calculated each year and will appear on the Notice of Assessment you receive from the Canada Revenue Agency (CRA) after filing your taxes.
- The top 5 RRSP mistakes and how to avoid them
- Download the free RRSP Guide today
- Are you saving enough in your RRSP? Try this RRSP calculator to find out.
Need help getting started?
An advisor can help you build a savings plan that meets your goals and needs. Most advisors now offer to meet Clients virtually by video chat. Find an advisor today.
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