An RRSP is simply a savings strategy for your retirement which allows you to invest on a tax-deferred basis. Your contributions to the plan are allowed to accumulate, along with investment income on this tax-free basis until the funds are withdrawn during your retirement years. Although the funds will be fully taxable at that time, this will be during a period of lower income and your tax rate will likely be lower.
Within your plan, all income generated by your savings are tax free as long as the profit is directed back into your account. Imagine, if your hard earned money is sheltered from paying tax AND earning you profit. Can it get any better than this?
One investment strategy is to contribute as much as you can to your RRSP each year. Check your latest income tax notice of assessment (issued by Revenue Canada) to find out your maximum contribution for the year or the previous years if you have not used the maximum.
MOST IMPORTANTLY, YOUR MONEY IS SHELTERED FROM TAXES AND WILL BRING YOU INTEREST ON INTEREST FOR YEARS.
