What is an RRSP?

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How do RRSPs work?

You can hold a wide range of investments within an RRSP1, depending on the type of plan, including stocks, bonds, guaranteed investment certificates (GICs), and mutual funds. Any investment income earned from these investments, is tax-deferred in the RRSP until you withdraw the funds.

How much you can contribute annually is subject to a maximum contribution amount, known as your RRSP contribution or deduction limit. Your RRSP contribution limit for 2019 is equal to 18% of your 2018 earned income, or $26,500 (whichever is lower) plus previous unused contribution room less any pension adjustments.

For more on RRSP contributions, review our guide on making RRSP contributions.

RRSP Investment Options

You have the flexibility to hold and move your money between a wide range of eligible investments in your RRSP1. These investments may include:

  • Cash
  • Savings account
  • GICs (Guaranteed Investment Certificates): An investment that offers a guaranteed rate of return over a fixed period.
  • Mutual Funds: An investment fund that pools the money of individual investors and uses it to buy securities such as stocks, bonds or other mutual funds. Unlike most other types of investment funds, mutual funds are “open-ended,” which means as more people invest, the fund issues new units.
  • Government and Corporate Savings Bonds: investments that work like an IOU (I-Owe-You), wherein investors make loans to a company/government, and usually earn a fixed rate of return.
  • Securities listed on a designated stock exchange – including individual stocks.
  • ETFs: An investment fund that holds the same mix of investments as a stock or bond market index and trades on a stock exchange.


What are the benefits of investing in an RRSP?

  • Tax-Deferred Savings: Any investment income earned on investments held within the plan is tax-deferred, as long as it remains in your RRSP.
  • Tax Deductions: Your RRSP contributions are tax-deductible and may help to reduce the total amount of income tax you pay.
  • Optimizing Deductions: You can carry forward your unused RRSP contribution room from years of lower income and use it in future years when your income may be higher. This can help you benefit from tax savings when you’re in a higher tax bracket.
  • Income Splitting: If you earn more than your spouse or common-law partner, contributing to a spousal RRSP may help reduce the total amount of tax you pay.
  • Financing your First Home or Education: You can withdraw money from your RRSP without being immediately taxed to pay for your first home or education, under the Home Buyers' Plan or Lifelong Learning Plan (LLP)2.

How long can my RRSP stay open?

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You are not allowed to own an RRSP past December 31 of the calendar year you turn 71.

At that point, you’ll have to withdraw funds from the RRSP as a lump sum, transfer its contents to a Registered Retirement Income Fund or purchase an annuity.


You may also be interested in:

RRSP Contribution Rules

Your guide on contributing to an RRSP, deductions, over-contributions.

Compound Interest Calculator

Use our Compound Interest Calculator to see how your investments could grow over time.

See what types of RRSPs TD offers

RRSPs can help you meet your retirement goals.
Open a RRSP with TD and start saving for your retirement.
For a Limited Time: Invest $1,000 in a RRSP and get $1004.

Legal

1 Depending on the type of plan.

2 Subject to eligibility and conditions.

3 Subject to any restrictions on the investments held.

4 Conditions apply. Offer expires February 9, 2020.


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