Save for your retirement and other major projects with a registered retirement savings plan (RRSP), and grow your money tax-free. Contributing to your RRSP every year is also a great way to reduce your income tax.
Are you in a higher tax bracket? Contributing to your RRSP reduces your taxable income. The more you contribute, the more you'll get back. You can contribute the lesser of the following: $26,010 (set contribution room for 2017) or 18% of your annual income. Check your federal notice of assessment to find out how much contribution room you have.
An RRSP reduces your tax bill today while sheltering your investment income until you withdraw it. Once you withdraw money from your RRSP after retirement, it becomes taxable income.
This will reduce your taxable income so you're more likely to get a refund next year, which you can then reinvest into your RRSP—it's a win-win!
Sometimes, it's easier to save little by little than to contribute a lump sum once a year. Set up automatic debits and make contributions to your RRSP on a regular basis throughout the year.
You decide how much and how often to contribute, like once a month or every payday. It's as easy as paying a bill. Just sit back and watch your savings grow!
What is income splitting? Income splitting is when an individual transfers money to their spouse who earns less to lower the total income tax paid by the couple. This is often a great strategy for retired couples.
You can also contribute to your spouse's RRSP even after you reach age 71, as long as your spouse is under 71. Good to know: the contributions you make to your spouse's RRSP belong to your spouse.