Why contribute to an RRSP?
Most Canadians contribute to an RRSP to lower their tax bill. But there are many other benefits to consider:
- Immediate tax savings
- Tax-deferred compounding
- Retirement tax savings
- Peace of mind
- Build your retirement nest egg
- Share your retirement nest egg
- Home Buyer’s Plan
- Lifelong Learning Plan
- Emergency funds
Your allowable contributions are tax deductible from your annual income
Your RRSP’s tax-sheltered environment maximizes the compound growth of your savings
When you withdraw funds for your retirement, not only will you potentially be paying income tax at a lower rate than when you contributed, but you can also create income eligible for both Pension Income Splitting and the Pension Income Credit.
Your RRSP can supplement your retirement income so you can afford a comfortable lifestyle when you retire.
You can invest funds for your future when you can most afford it - during your peak earning years
You can buy RRSPs for your spouse, and even share your retirement income once you convert your RRSPs - and sharing can really lower your family tax bills
You can withdraw up to $25,000 from your RRSP, without penalty or tax, to be applied to the purchase of your first home. You then have 15 years to repay your RRSP.
You can use up to $20,000 of your RRSP to pay for your own or your common-law partner’s education. If certain conditions are met, the withdrawal is tax-free and can be paid back to your RRSPs over ten years.
While a TFSA is a better emergency fund, you could access your RRSP if you needed to, such as finding yourself facing a career change. There are tax consequences, though. Withdrawals are considered taxable income.
