Registered Retirement Savings Plan in Canada – Building your wealth

By Isabelle Griesmer

When we think of a savings plan for retirement, we imagine packing away quarters and dollar bills into a glass piggy bank until we are 65 years old. Little do most people know, there are several ways you can plan and save for your retirement. One of those is Registered Retirement Savings Plan, no worries, we plan on giving you the complete rundown of RRSPs.

RRSPs? Let Me Explain

The Registered Retirement Savings Plan is an investment account registered with the government you use for retirement. It is also known as a tax-advantaged account. The government created them with the intent to provide tax breaks to those who invest money in RRSPs to motivate them to put away money for their retirement. 

Heres How RRSPs Work

RRSPs have a few components, including tax advantages, contributions, and investments you can hold.

We’ll start with the tax advantages! There are three, to be exact. One, tax-deductible contributions, meaning you get immediate tax relief by deducting your RRSP contributions from your income each year. Essentially, your contributions are pre-tax dollars. Two, the money you make on your investments is not taxed as long as it stays within the plan, known as tax-sheltered earnings. Third and lastly, tax deferral. You will end up paying some tax on your Registered Retirement Savings Plan when you withdraw them, including both your investment earnings and your contributions. However, you have deferred this tax liability to the future when your tax rate may be lower in retirement than during your contributing years. 

So how much can you contribute? Great question! If you file an income tax return and earn income, you can absolutely open and contribute to an RRSP! Keep in mind that they are subject to their own set of rules because they are registered accounts. One of those rules has to do with the amount of money you can contribute in a given year. You are able to contribute the baser of: 18% of your earned income in the previous year, or the maximum contribution amount for the tax year 2021: $27,830.

There are few qualified investments you can hold with a Registered Retirements Savings Plan. Here are a few: 


  • cash
  • gold and silver bars
  • savings bonds 
  • treasury bills
  • bonds 
  • ETFs 
  • mutual funds
  • Canadian and foreign equities
  • Canadian mortgages

How Long Can Your RRSP Stay Open?

Once you are the age of 71, you are required to close your account. You can withdraw your RRSP savings in cash, convert your RRSP to an RRIF or buy an annuity.

When and How To Start

In Canada, you are essentially urged to save for your retirement as soon as you start working. This gives you a head start on your retirement funds and allows you to put aside less each month and steadily build up your funds. 

     Here’s a scenario. You start saving only after age 35 and keep aside $2,500 per year for the next 30 years. By age 65, you will have set aside $75,000 ($2,500 x 30) of your own money, and it will grow to about $255,000, assuming the same 7% annual return.

There are a few steps to opening a registered retirement savings plan that you need to know. The first step, looking around and comparing things like fees and programs. There are different types of RRSP accounts, individual, spousal, and group RRSPs. So get to know the differences and which one works best for you. Once you have done that, next, you must decide how you prefer to invest your savings. Your options include savings accounts, GICs, Canada Savings Bonds, mutual funds, ETFs, stocks, and bonds.

The third step is to choose an RRSP financial institution and have the appropriate identification when applying! Lastly, complete the application and open the account. When you are applying, keep in mind, you will be asked questions regarding how much you plan to invest, your goals, how much you made in the last year, if you have a pension plan, and who your beneficiary is. 

Have more questions about retirement or even the cost of living in Canada? Here at Howzit, we partner with exceptional financial service professional that can give you more insight into these topics and more.

Did these points raise even more questions? Let’s help you get more answers – reach out to us to chat!
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 Vincent, a qualified Actuary, started his career in South Africa in 1996. After working in the UK for two years he co-managed one of the first fund of hedge funds in South Africa. During this time, he created and implemented investment strategies for some of South Africa’s largest pension funds. During 2007, Vincent co-founded Seed Investments, a private client wealth management business and in 2013 he co-founded Seed Analytics, a fintech company that provides financial advisors with consolidated client reporting and Business Intelligence. Vincent relocated to Toronto in 2017 and co-founded Kingsmere Financial.

He has a passion to see private clients reaching their financial goals through financial coaching and integrated software solutions. These are some of the elements that make Kingsmere Financial unique. For more information refer to

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