An RRSP (Registered Retirement Savings Plan) is a tax-advantaged retirement savings account available to Canadians. It is designed to help individuals save for retirement while offering valuable tax benefits. Contributions to an RRSP are tax-deductible, which means they can reduce your taxable income in the year they are made. Additionally, any income or gains earned within the RRSP—such as interest, dividends, or capital gains—are tax-deferred until the funds are withdrawn.

Each year, Canadians can contribute up to 18% of their previous year’s earned income, up to an annual limit set by the Canada Revenue Agency (CRA). Unused contribution room can be carried forward to future years.

RRSPs can hold a wide range of investments, including stocks, bonds, mutual funds, GICs, and more. They are particularly effective for individuals in higher tax brackets, as the immediate tax savings can be significant.

Withdrawals from an RRSP are taxed as income in the year they are taken out. However, the idea is that individuals will withdraw funds during retirement, when they are typically in a lower tax bracket.

In summary, RRSPs are a powerful tool for long-term retirement planning, offering both immediate tax relief and deferred growth on investments.