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Home  ->  RRSPs RRIFs and TFSAs -> What is an RRSP?  RRIF?

What is an RRSP?  RRIF?

An RRSP, or Registered Retirement Savings Plan, is a registered savings or investment account which allows you to defer paying tax on funds deposited to it.  When you make a contribution to your RRSP, you get a tax deduction for the amount contributed.  The deduction reduces taxable income, so the higher your marginal tax rate, the greater the tax savings will be.

Income Earned in a Registered Account is Not Taxable

Income earned in an RRSP is not taxable while it remains in the RRSP, including interest, dividends, and capital gains, so can grow tax free until the money is withdrawn.  There may be tax withheld from dividends received from some foreign investments, but not from dividends received from US corporations. See our article on which investments should be held inside vs outside an registered account.

RRSP Withdrawals = Taxable Income

Funds can be withdrawn from an RRSP at any time, but all withdrawal amounts must be included in taxable income on Line 12900 of the tax return (RRSP income).  At the time funds are withdrawn, tax will be withheld based on the total withdrawal amount.  See our article which details the amount of withholding tax on RRSP withdrawals.

Mandatory Conversion to RRIF

Funds can remain in an RRSP until the year the taxpayer turns 71, at which time the funds must be withdrawn, or converted into a Registered Retirement Income Fund (RRIF), another registered account.  Income earned in a RRIF is also not taxable while it remains in the RRIF, including interest, dividends and capital gains.  In the year after an RRSP is converted to a RRIF, minimum withdrawals must be made.  More than the minimum withdrawal can be taken out, but if the RRIF is locked-in there will be a maximum withdrawal.

Theoretically, when you start withdrawing funds from an RRSP or RRIF, you will be in a lower tax bracket, and the funds can be withdrawn at a lower tax rate than when they were contributed. Resources

Is it better to invest in RRSPs or in a non-registered account?

Which investments should be held inside vs outside an registered account

Withholding tax on RRSP and RRIF withdrawals

Registered Retirement Income Fund (RRIF)

Tax-Free Savings Account (TFSA)

What is better - TFSA or RRSP?

Tax Tip:  Pay yourself first.

Revised: October 26, 2023


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