What is a Registered Savings Plan?

The Government of Canada offers many Registered Savings Plans to help you save. These plans are savings accounts that come with tax benefits. They let you avoid or defer (pay later) some of the taxes you pay. The “registered” in Registered Savings Plans comes from how you have to register the account with the Canada Revenue Agency to receive benefits.

There are four main types of Registered Savings Plans:

  1. Tax-Free Savings Account (TFSA)
  2. Registered Retirement Saving Plan (RRSP)
  3. Registered Education Savings Plan (RESP)
  4. Registered Disability Savings Plan (RDSP)

Saving Your Money in Canada (Savings Plans)

Registered savings plans sound great on paper, but there is a lot to consider before you sign. It’s important to find out what fees and conditions apply. Check out this list by the Financial Consumer Agency of Canada: Before you sign any contract: 10 things you need to know.

Important Questions
  • Are there rules about how much I can save each year?
  • What are the conditions and risks?
  • When do I contribute?
  • Who will invest my money?
  • How fast will my money grow?
  • How much will this plan cost?
  • What happens if my plans change?
  • Will income from the plan affect my other sources of future income?
Tax-Free Savings Account (TFSA)

Canadians who are 18 or older and have a valid social insurance number can open up a TFSA. The TFSA program lets you save money tax-free. Meaning, any income earned from this plan is not taxed. Each year, you can save up to $5500 in a TFSA without paying tax on your earnings. For more information on eligibility, rules, and conditions, visit here.

Registered Retirement Savings Plan (RRSP)

An RRSP is a retirement savings plan that either you or your spouse can contribute to. RRSP contributions can be used to reduce your tax. As long as funds remain in the plan, any income you earn from an RRSP is tax exempt. The maximum amount you can put into an RRSP is equal to 18% of your employment income. Full details can be found here.

There are other plans closely related to the RRSP program:

Registered Education Savings Plans (RESP)

A Registered Education Savings Plan (RESP) is a special savings account for parents who want to save for their child’s education after high school. Think of an RESP as a contract between you (the subscriber) and another person or organization (the promoter). Your child (the future student) is the beneficiary, the one who receives the educational assistance payments (EAPs).

Unlike other savings plans, there is no yearly limit on how much you can contribute to an RESP. However, your lifetime contributions cannot exceed $50,000. Often, a student will pay little or no income tax on the income that the RESP earns.

For more information on RESPs, visit here and here.

Registered Disability Savings Plan (RDSP)

An RDSP helps you save long-term for, and support, a person with disabilities.  When someone with a disability (the beneficiary) needs money, they can withdraw the savings and any earnings they have produced. Often, a person with a disability will pay little or no income tax on the income that the plan earns. Money in an RDSP is eligible for grants from the Government of Canada.

Contributions to an RDSP are not tax deductible. You can make  contributions until the beneficiary turns 59. Like the RESP, there’s no yearly limit to the amount you can put into an RDSP. However, you cannot contribute more than $200,000 in a lifetime for one person.

Find more information here and here.

Check out the following links from the Government of Canada for more information:

Savings and pension plans

3.2.4 Registered savings plans

Saving with registered plans

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