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What is an RSP?

A registered Retirement Savings Plan (RSP) is an investment account designed primarily for saving toward your retirement years. As a retirement savings vehicle, regulated by the Canadian government, RSPs have special tax benefits. Your annual RSP contribution can greatly reduce the amount of income tax you pay in that year, and the money you put away can have years of tax-deferred growth potential. You only pay tax on the amounts you withdraw. RSPs are available through chartered banks, trust companies and other financial institutions.

Contributions to an RSP can only be made by individuals with "earned income" taxable in Canada, which includes salaries, self-employment income, maintenance and alimony payments, and net rental income (but does not include income from pensions or investments). Certain other types of income may be eligible -- consult a tax advisor or Canada Revenue Agency (CRA).

CRA issues statements to individual taxpayers with their "Notice of Assessment" informing them of their RSP contribution limit for the following year.


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