RRSP is a very essential part of most Canadians, but unfortunately the majority does not understand it ! and there are a lot of MYTH spread around the subject matter.
Please find a power point presentation which will give you an idea and also the alternative to it.
Let us do the analysis the meaning of RRSP, R stands for Registered = means that you are informing the Government, that you have (SP) a Saving Plan for your (R) Retirement. In return Government (CRA- Canada Revenue Agency) give the investor the following Three (3) Benefits
TAX Deduction =
means from your Gross income earned through out the year you may deduct the amount that you invested in an investment and registered with CRA, allows you to deduct equal or less amount that year and once need not to pay tax on that portion, and if Tax was already deducted at source then you are entitled for a Tax refund.
TAX Deferral =
The amount invested in any investment which is Registered as RRSP, the growth on the money is not accounted for tax calculation until such time of withdrawal or at age 71 in which you need to be converted to a RRIF or an Annuity. And then you need to follow the table. This is a powerful strategy for wealth accumulation.
HBP /LLP =
One can use the funds in RRSP under First Time Home Buyers Plan, with out with Holding Tax and enjoy the funds over 15 years’ time only they need to invest back in RRSP equal installment amount. Also the funds in RRSP can be used in Lifelong Leaning Program purpose of the investor.
Most advisor guide or Advise that RRSP is the best way to save for the retirement, but I disagree to that, it may be true for some but there are BETTER Alternatives that can be explored.