It is often said RRSP’s are a great tool everyone should use, or I hear them criticized and it said they should never be used. I believe RRSP’s are a tool, when used correctly they are a powerful tool.
Before you can decide if this tool is right for you, we must first understand what it is and what it can and can’t do.
Basic RRSP benefits
- The amount contributed to an RRSP can be deducted from your taxable income
- The growth in an RRSP is tax deferred
Basic RRSP Downside
- All withdraws from an RRSP are 100% taxable
- In retirement (government sets the age) you will need to move the funds out of the RRSP (other options available with more restrictions)
RRSP’s is a tool that allows you to defer the tax until retirement. If the tax rules stay the same and you make less in retirement this can be a great deal, if you plan to make more in retirement then RRSP’s will likely cost you.
