RRSP

Chapter 5 page 10

Since someones annual income is normally taxed via various source deductions, contributing to an RRSP means that one generally receive a refund of the tax already paid on that income.

Furthermore, any earnings generated on the funds held in an RRSP are sheltered from taxes for as long as those earnings remain in the plan. One therefore enjoy the substantial benefit of tax free compounding of earnings.

RRSP only defer the payments of taxes, eventually all funds contributed to, and earned within RRSPs will be taxed. The advantage of an RRSP is that a retiree will likely pay income taxes on RRSP funds at a lower rate than would have been paid at the time of contribution.

All contributions to RRSP for a given tax year must be made either during the calendar year or within 60 days after the end of the year. Contributions can be made up to the age of 71.

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