What is an RRSP?
An RRSP is a registered account designed for retirement. Contributions reduce your taxable income for the year, growth inside is tax-deferred, and withdrawals in retirement are taxed as ordinary income. New room each year is 18% of last year’s earned income, up to a CRA-set dollar cap that updates annually. Unused room carries forward indefinitely. Group RRSP, RRSPs at any bank or brokerage, and self-directed RRSPs all share the same lifetime room.
You earn $90,000 in Ontario and contribute $10,000 to your RRSP. Your marginal rate is roughly 31%, so the refund is around $3,100. If you reinvest that refund into your TFSA at 8% for 30 years, that single refund alone compounds to about $31,200. The headline contribution was $10,000; the real cost to you was $6,900.
Contributing to an RRSP while your income is under roughly $50,000. You get the deduction at a low bracket today and pay tax at a potentially higher bracket in retirement. At low incomes, the TFSA wins almost every time.
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