A Registered Retirement Savings Plan (RRSP) is a savings account that you register with the federal government intended to assist you in saving for your retirement. Since this form of savings is not the only retirement plan available, you may be wondering why you should invest your hard-earned money into an RRSP

To help highlight the reasons to open an RRSP, we asked a few of our financial advisors to share their top reasons below:

Your Contributions are Tax-Deductible

One of the most popular reasons shared as to why open an RRSP is that your contributions to the plan are tax-deductible. In other words, your RRSP contribution can be claimed as a deduction from your income on your tax return. As well, if you experience a reduction in your income, the tax deduction for your contribution can be held until your income increases once again. Consequently, once you have moved into a higher tax bracket, you will enjoy greater tax savings on your contributions.

Your RRSP Can Be Converted to Regular Payments After Retirement

Your RRSP savings can be easily converted into an annuity or an RRIF after you have retired without paying any tax. However, once converted, you cannot avoid paying tax on the regular payments that will be sent to you annually. Nonetheless, if you fall into a lower tax bracket after retiring, your tax will be lower.

Your Savings Increase Over Time

If you continue keeping your investment earnings in an RRSP, you will not be required to pay any tax on them or any income earned. As a result of this, you can rest assured that your savings will keep growing over time.

You Can Borrow from an RRSP to Finance Your Home or Education

Are you planning to buy your first home? Would you like to pay for your education? RRSPs allow you to borrow from your contribution to take care of these key items. For your first home, you can get as much as $25,000 from your RRSP contribution through the Home Buyers’ Plan (HBP). If you want to finance your education or that of your spouse, you can borrow as much as $20,000 from RRSP via the Lifelong Learning Plan (LLP). As long as you ensure the money is repaid within the agreed timeframe, you don’t need to pay any tax on the loans.

A Spousal RRSP is Capable of Lowering Your Combined Tax Load

If your income is higher than that of your spouse and you want to assist them to improve their tax-free savings, you can take advantage of a spousal RRSP. The spousal RRSP will allow you to divide the retirement income into two equal parts. As a result of this, the total amount of tax on each part may be lowered.

An RRSP may not be right for everyone, but with the above information and the expert advice of a financial advisor you will be better prepared to make that decision for your future.