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When you make a contribution to an RRSP, you can claim it as a deduction on your income tax return.

You can open up an RRSP at any age, as long as you have an earned income, and file a tax return. RRSP must be converted to a RRIF by age 71.

You can contribute up to the lesser of18% of; your earned income in the previous year, or the maximum contribution of $25,370 for 2016. Unused contribution room accumulates.

If your marginal (highest) tax rate is 40%, and you contribute $1000 to an RRSP,  the tax you pay will be reduced by $400 that year. 

An RRSP can hold a variety of investments including cash, stocks, bonds, ETFs, managed funds, commodities, and more.

Investments in an RRSP grow tax-free. You can make a withdrawal from an RRSP at any time without penalty, but the withdrawal will add to your income, increasing your tax payable for that year. When you withdraw from an RRSP you don't get your contribution room back. 

There is an option to borrow from your RRSP tax-free, for a down payment on a home, through the Home Buyers' Plan (HBP) or to cover the costs of education through the Lifelong Learning Plan (LLP). These funds must be paid back to the account later.

If you anticipate a low income earning year in the future, like starting a business or taking an extended vacation, you might benefit from an RRSP contribution now, and withdraw it in the year(s) of lower income. 

To optimize the tax advantage of an RRSP, it's often best to save contribution room for your highest income earning years because your tax deduction will be the greatest in those years. Learn more about when to contribute here.

It's possible to make a contribution and defer the tax deduction for another year when your income is higher.

Opening a spousal RRSP allows a higher income earning spouse or partner to contribute to an account registered to a lower income earning spouse. This allows the tax burden to be spread out over the 2, lowering your taxes.

Registered Retirement Savings Plan

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