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Updated 2mo ago.
Updated 2mo ago.
The RRSP is a Canadian registered account that allows contributions to be deducted from taxable income. Investments grow tax-sheltered until withdrawal. Contribution room equals 18% of prior-year earned income, up to an annual limit ($31,560 in 2024).
If you earn $70,000 per year, you accumulate roughly $12,600 in new RRSP room each year. By contributing $12,600 at a 40% marginal tax rate, you receive a tax refund of about $5,040. That money can be reinvested into ETFs like VEQT.TO.
The RRSP is ideal if your current marginal tax rate is higher than your expected rate at retirement. The tax deduction today and tax-deferred growth are very powerful over 20-30 years. At age 71, the RRSP must be converted to an RRIF (Registered Retirement Income Fund).