How does an RRSP work?
Any contributions into your RRSP can help you decrease your current taxable income. This means you won’t have to pay taxes on your contributions or any investment growth until you withdraw funds.
For most Canadians, withdrawing from your RRSP at a later point in life – in your 60s or 70s – means paying much less tax.
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, all the while helping to lower your current tax bill.
Plus, you can hold a variety of investments in your RRSP, like:
- segregated funds,
- GICs, and
- mutual funds.