What is a Registered Retirement Savings Plan?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 19 September 2018
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A Registered Retirement Savings Plan (RRSP) is a savings plan intended to help Canadians prepare for retirement by setting money aside and receiving tax benefits for doing so. Such plans are designed to create an incentive for savings by rewarding people with tax breaks on their contributions and income earned from the plan. They are registered with the government, and when people are ready to retire, they can start drawing on the plan as a source of income.

There are several tax advantages to such plans. Any contributions come with deferred taxes, allowing people to reduce taxable income while they are working. In addition, interest earned on a Registered Retirement Savings Plan also comes with deferred interest. People with such plans can draw on them in emergencies like periods of unemployment without fees, allowing people to support themselves during periods of financial hardship with the money they have saved.

People who hold Registered Retirement Savings Plans have an annual cap on contributions, based on the cost of living. Tables listing annual caps are available through the government, as well as banks and other financial institutions. The types of contributions can vary and people are often encouraged to maintain a mix of investments in a Registered Retirement Savings Plan for the purpose of reducing risk and ensuring the availability of funds while in retirement.


Canadians making plans for retirement can use the Registered Retirement Savings Plan to supplement the income they receive from the government after retirement. Government benefits for retirees may not be enough to live on, especially if people live in an area with a high cost of living or they have high expenses. Saving money for retirement is incentivized by the government to prevent seniors from living in poverty and to reduce reliance on government benefits for people after retirement.

Setting up a Registered Retirement Savings Plan can be done individually or as part of a group under the auspices of an employer. Holders of such plans can discuss their savings and retirement options with a financial planner or account to get information about how to use the plan most effectively. It is also important to have measures in place for handling the account in the event of a death.

When the account holder reaches the age of 71, it is necessary to either cash out a Registered Retirement Savings Plan, or transfer it to a different financial plan aimed at holding funds to provide retirement income.



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