{"id":730,"date":"2019-08-30T00:57:12","date_gmt":"2019-08-30T00:57:12","guid":{"rendered":"http:\/\/localhost\/mrc_blog\/personal-finance\/canadian-retirement-savings-plans-rsp-versus-rrsp\/"},"modified":"2023-11-24T05:23:24","modified_gmt":"2023-11-24T05:23:24","slug":"rsp-vs-rrsp","status":"publish","type":"post","link":"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/","title":{"rendered":"Canadian Retirement Savings Plans: RSP versus RRSP"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_17 counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" style=\"display: none;\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list ez-toc-list-level-1\"><li class=\"ez-toc-page-1 ez-toc-heading-level-3\"><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/#What_is_an_RSP\" title=\"What is an RSP?\">What is an RSP?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-3\"><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/#What_is_an_RRSP\" title=\"What is an RRSP?\">What is an RRSP?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-3\"><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/#Other_Canadian_Retirement_Savings_Plans\" title=\"Other Canadian Retirement Savings Plans\">Other Canadian Retirement Savings Plans<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-3\"><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/#Tax_Free_Savings_Accounts_TFSA\" title=\"Tax Free Savings Accounts (TFSA):\">Tax Free Savings Accounts (TFSA):<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-3\"><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/#Registered_Pension_Plan_RPP\" title=\"Registered Pension Plan (RPP): \">Registered Pension Plan (RPP): <\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-3\"><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/#Non-registered_Account\" title=\"Non-registered Account:\">Non-registered Account:<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-3\"><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/#Choosing_an_RSP\" title=\"Choosing an RSP\">Choosing an RSP<\/a><\/li><\/ul><\/nav><\/div>\n<span class=\"rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time:<\/span> <span class=\"rt-time\">3<\/span> <span class=\"rt-label rt-postfix\">Min<\/span><\/span><p>&nbsp;<\/p>\n<p>Chances are you don\u2019t want to work for the rest of your life, who does? Planning for retirement involves saving money to support your retirement which can be done through various saving plans.<\/p>\n<p>&nbsp;<\/p>\n<p>In Canada, there are two common terms for these savings plans: Retirement Savings Plan, or RSP for short, and Registered Retirement Savings Plan, or RRSP for short. The terms RSP and <a class=\"wpil_keyword_link \" href=\"https:\/\/myratecompass.ca\/savings-accounts\/rrsp\"  title=\"RRSP\" data-wpil-keyword-link=\"linked\">RRSP<\/a> are often used interchangeably despite the fact that they are not quite the same thing. No wonder you\u2019re confused by these terms! To navigate through the confusion of retirement savings plans in Canada, continue reading below.<\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_an_RSP\"><\/span><strong>What is an RSP?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p>RSP stands for Retirement Savings Plan. An RSP is a broad term used to describe any savings account that is intended for retirement savings. RRSPs are a type of RSP and there are a few others that fall under the broad scope of an RSP which will be discussed below.<\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_an_RRSP\"><\/span><strong>What is an RRSP?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p>RRSP stands for Registered Retirement Savings Plan and it is registered with the government of Canada. The account allows you to save for retirement and all investment income earned within the account is tax free. Many types of accounts can be held within an RRSP such as <a class=\"wpil_keyword_link \" href=\"https:\/\/myratecompass.ca\/savings-accounts\" title=\"savings accounts\" data-wpil-keyword-link=\"linked\">savings accounts<\/a>, GICs, bonds and stocks. Investment income earned from these assets within your RRSP are completely tax free. In addition, contributions to your RRSP are deductible for tax purposes. In other words, the amount you contribute to your RRSP reduces your income for tax purposes by the same amount.<\/p>\n<p>&nbsp;<\/p>\n<p>The only drawback to an RRSP is the amount that you are allowed to contribute is limited and withdrawals are taxed exorbitantly. The Canada Revenue Agency (CRA) determines how much individuals can contribute each year which is typically around 18% of your previous year\u2019s earnings. If you don\u2019t use all your contribution room in a year, it\u2019s carried forward to the next year.<\/p>\n<p>&nbsp;<\/p>\n<p>Secondly, when you withdraw from an RRSP before you retire, you are subject to intense withholding taxes. Be sure not to contribute to an RRSP unless you\u2019re sure you won\u2019t need that money for something else in the short term. Once your money is in an RRSP, it should stay there until you retire! There are exceptions to this rule, for example the Lifelong Learning Plan (LLP) and the Home Buyers Plan (HBP). These exceptions allow individuals to withdraw a certain amount from your RRSP tax free to help you pay for post-secondary education or your first home purchase.<\/p>\n<p>&nbsp;<\/p>\n<p>Finally, when you turn 71, you must convert your RRSP into a RRIF which stands for Registered Retirement Income Fund. When you withdraw from a RRIF, the amount is subject to income tax in that year, even when you\u2019re retired.<\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Other_Canadian_Retirement_Savings_Plans\"><\/span><strong>Other Canadian Retirement Savings Plans<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p>An RRSP is the most commonly used retirement savings plan, however, there are others available to you. Below are other savings plans individuals can use for retirement.<\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Tax_Free_Savings_Accounts_TFSA\"><\/span><strong><em>Tax Free Savings Accounts (TFSA):<\/em><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A <a class=\"wpil_keyword_link \" href=\"https:\/\/myratecompass.ca\/savings-accounts\/tfsa\" title=\"TFSA\" data-wpil-keyword-link=\"linked\">TFSA<\/a> is essentially the exact same thing as an RRSP except that the savings can be used for any purpose, not just retirement. In addition, contribution and withdrawal activity within your <a class=\"wpil_keyword_link \" href=\"https:\/\/myratecompass.ca\/blog\/savings\/best-tfsa-savings-accounts-in-canada\/\"  title=\"TFSA\" data-wpil-keyword-link=\"linked\">TFSA<\/a> do not have any tax implications.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Registered_Pension_Plan_RPP\"><\/span><strong><em>Registered Pension Plan (RPP):<\/em> <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>These are employer-sponsored or corporate pension plans that help their employees save for retirement. RPPs are part of your contribution room designated by the CRA. There are two types of RPPs, defined benefit and defined contribution.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Non-registered_Account\"><\/span><strong><em>Non-registered Account:<\/em><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Any account that is not registered with the government, but is used for retirement savings, would be considered an RSP as well. These types of accounts do not come with contribution room, tax sheltering benefits or withdrawal rules.<\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Choosing_an_RSP\"><\/span><strong>Choosing an RSP<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p>As a rule of thumb, <a href=\"\/savings-accounts\/rrsp\">RRSPs<\/a> and <a href=\"\/savings-accounts\/tfsa\">TFSAs<\/a> are the best savings accounts available to Canadians because of their significant tax advantages. It\u2019s wise to use both accounts before considering using non-registered accounts to take advantage of the benefits. RPPs are also advantageous if your employer offers them. If you max out your contribution room, then you should consider using non-registered accounts.<\/p>\n<p>&nbsp;<\/p>\n<p>It\u2019s important to note that there is no best retirement plan that is ideal for every Canadian. In other words, there is no \u201cone size fits all\u201d retirement savings solution! It all depends on your financial goals and current financial situation. Using a combination of various savings plans is often recommended to allow the individual to take advantage of all offers simultaneously.<\/p>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time:<\/span> <span class=\"rt-time\">3<\/span> <span class=\"rt-label rt-postfix\">Min<\/span><\/span> &nbsp; Chances are you don\u2019t want to work for the rest of your life, who does? Planning for retirement involves saving money to support your retirement which can be done through various saving plans. &nbsp; In Canada, there are two common terms for these savings plans: Retirement Savings Plan, or RSP for short, and Registered&hellip; <a class=\"more-link\" href=\"https:\/\/myratecompass.ca\/blog\/personal-finance\/rsp-vs-rrsp\/\">Continue reading <span class=\"screen-reader-text\">Canadian Retirement Savings Plans: RSP versus RRSP<\/span><\/a><\/p>\n","protected":false},"author":5,"featured_media":731,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[10],"tags":[21],"class_list":["post-730","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-finance","tag-blog-post-template-1-main-template-to-use","entry"],"aioseo_notices":[],"featured_image_urls":{"full":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",924,616,false],"thumbnail":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",150,100,false],"medium":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",300,200,false],"medium_large":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",750,500,false],"large":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",750,500,false],"1536x1536":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",924,616,false],"2048x2048":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",924,616,false],"post-thumbnail":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",924,616,false],"post-image-medium":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",375,250,false]},"post_excerpt_stackable":"<p>Table of Contents What is an RSP?What is an RRSP?Other Canadian Retirement Savings PlansTax Free Savings Accounts (TFSA):Registered Pension Plan (RPP): Non-registered Account:Choosing an RSP Reading Time: 3 Min&nbsp; Chances are you don\u2019t want to work for the rest of your life, who does? Planning for retirement involves saving money to support your retirement which can be done through various saving plans. &nbsp; In Canada, there are two common terms for these savings plans: Retirement Savings Plan, or RSP for short, and Registered Retirement Savings Plan, or RRSP for short. The terms RSP and RRSP are often used interchangeably despite&hellip;<\/p>\n","category_list":"<a href=\"https:\/\/myratecompass.ca\/blog\/.\/personal-finance\/\" rel=\"category tag\">Personal Finance<\/a>","author_info":{"name":"Mohamed Konate","url":"https:\/\/myratecompass.ca\/blog\/author\/mohamedkonate\/"},"comments_num":"0 comments","featured_image_urls_v2":{"full":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",924,616,false],"thumbnail":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",150,100,false],"medium":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",300,200,false],"medium_large":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",750,500,false],"large":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",750,500,false],"1536x1536":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",924,616,false],"2048x2048":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",924,616,false],"post-thumbnail":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",924,616,false],"post-image-medium":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg",375,250,false]},"post_excerpt_stackable_v2":"<p>Table of Contents What is an RSP?What is an RRSP?Other Canadian Retirement Savings PlansTax Free Savings Accounts (TFSA):Registered Pension Plan (RPP): Non-registered Account:Choosing an RSP Reading Time: 3 Min&nbsp; Chances are you don\u2019t want to work for the rest of your life, who does? Planning for retirement involves saving money to support your retirement which can be done through various saving plans. &nbsp; In Canada, there are two common terms for these savings plans: Retirement Savings Plan, or RSP for short, and Registered Retirement Savings Plan, or RRSP for short. The terms RSP and RRSP are often used interchangeably despite&hellip;<\/p>\n","category_list_v2":"<a href=\"https:\/\/myratecompass.ca\/blog\/.\/personal-finance\/\" rel=\"category tag\">Personal Finance<\/a>","author_info_v2":{"name":"Mohamed Konate","url":"https:\/\/myratecompass.ca\/blog\/author\/mohamedkonate\/"},"comments_num_v2":"0 comments","jetpack_featured_media_url":"https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/RRSP-image-my-rate-compass.jpg","_links":{"self":[{"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/posts\/730","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/comments?post=730"}],"version-history":[{"count":3,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/posts\/730\/revisions"}],"predecessor-version":[{"id":6067,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/posts\/730\/revisions\/6067"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/media\/731"}],"wp:attachment":[{"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/media?parent=730"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/categories?post=730"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/tags?post=730"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}