{"id":92318,"date":"2025-02-13T15:48:15","date_gmt":"2025-02-13T20:48:15","guid":{"rendered":""},"modified":"2025-02-13T16:13:19","modified_gmt":"2025-02-13T21:13:19","slug":"how-registered-retirement-savings-plan-works-newcomer-guide-to-rrsp","status":"publish","type":"rbc_my_money_matter","link":"https:\/\/www.rbcroyalbank.com\/en-ca\/my-money-matters\/life-events\/new-to-canada\/banking-in-canada\/how-registered-retirement-savings-plan-works-newcomer-guide-to-rrsp\/","title":{"rendered":"How does the Registered Retirement Savings Plan work? The newcomer\u2019s guide to RRSP"},"content":{"rendered":"\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<p>Most newcomers choose to settle in Canada because they want a better life for themselves and their family. This long-term goal requires long-term financial planning. While in the short term you may need to address your immediate financial needs, you shouldn\u2019t lose sight of your long-term financial needs, including retirement. In Canada, government investment accounts like the Registered Retirement Savings Plan (RRSP) offer tax benefits on contributions to help you save both now and in the future.<\/p>\n\n\n\n<div class=\"wp-block-rbc-rbc-block drop-shadow pos-rel top-line-blue block-wpr  mar-b-hlf\">\n<div class=\"wp-block-rbc-rbc-block-inner-block block-inner\">\n<h4 class=\"wp-block-heading\" id=\"h-tldr\">TLDR<\/h4>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>RRSPs allow newcomers to Canada to save for retirement with contributions that are tax-deductible and investment earnings that grow tax-deferred until withdrawal (usually in retirement, when you are in a lower tax bracket).<\/p>\n<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>After you have filed taxes in Canada for the first time, you can contribute up to 18% of your annual income (up to the annual limit), with unused contribution from past years carrying forward for future years.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>You can borrow funds from your RRSP to pay for education or to buy a home without penalty, provided you repay the funds within the required time period.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>RRSPs differ from TFSAs in terms of contribution timing and withdrawal flexibility.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>RRSPs remain beneficial even if you don\u2019t retire in Canada, though withdrawals as a non-resident are subject to withholding taxes.<\/p>\n<\/li>\n<\/ul>\n<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">What is a <a href=\"https:\/\/www.rbcroyalbank.com\/investments\/rrsp.html\" data-dig-id=\"LP-92318-aec16b1a\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Registered Retirement Savings Plan (RRSP)\" class=\"rbc-link-format\">Registered Retirement Savings Plan (RRSP)<\/a>?<\/h2>\n\n\n\n<p>An RRSP is a savings plan that allows you to save a portion of your income for retirement. Unlike regular savings plans, the Registered Retirement Savings Plan is registered by the government and offers certain tax advantages, which make it a popular investment choice among Canadians.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How do RRSP tax benefits work<\/h2>\n\n\n\n<p>To encourage people to save more, the government offers two key tax benefits on your RRSP contributions:<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>RRSP contributions are tax-deductible<\/strong>, up to a certain limit. You can deduct your annual RRSP contribution from your taxable income and reduce your tax liability for the year or get a tax refund. This effectively means that you contribute to RRSP from your pre-tax income.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Income earned on your RRSP is tax-deferred.<\/strong>&nbsp;This means you don\u2019t need to&nbsp;pay income tax&nbsp;on capital gains or dividends until you start withdrawing funds or receiving income from your RRSP. Both your contributions and earnings will be taxed at the time of withdrawal, but, since you\u2019ll likely be in a lower tax bracket after retirement, you will likely have to pay less tax on your RRSP earnings.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p>To encourage people to save more, the government offers two key tax benefits on your RRSP contributions:<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Cash<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><a href=\"https:\/\/www.rbcroyalbank.com\/investments\/gics.html\" data-dig-id=\"LP-92318-9b50df7f\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Guaranteed Investment Certificates (GICs)\" class=\"rbc-link-format\">Guaranteed Investment Certificates (GICs)<\/a><\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Bonds, including government and corporate bonds<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><a href=\"https:\/\/www.rbcroyalbank.com\/investments\/mutual-funds.html\" data-dig-id=\"LP-92318-a5ce777e\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Eligible mutual funds\" class=\"rbc-link-format\">Eligible mutual funds<\/a><\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Canadian and foreign stocks (or equities)<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><a href=\"https:\/\/www.rbcroyalbank.com\/investments\/etfs.html\" data-dig-id=\"LP-92318-3486c653\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Exchange-Traded funds (ETFs)\" class=\"rbc-link-format\">Exchange-Traded funds (ETFs)<\/a><\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Treasury bills<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Gold and silver bars<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Mortgage-backed securities<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Income trusts<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p>The investments you can make depend on the type of RRSP account you have, so be sure to&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/dms\/enterprise\/newcomers\/meeting-place.html\" data-dig-id=\"LP-92318-5a0a4202\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"speak to a financial advisor\" class=\"rbc-link-format\">speak to a financial advisor<\/a>&nbsp;for guidance on the ideal RRSP account for your needs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Can newcomers to Canada open and contribute to an RRSP?<\/h2>\n\n\n\n<p>To be eligible to open an RRSP in Canada, you must:<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Be a&nbsp;<a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/international-non-residents\/information-been-moved\/determining-your-residency-status.html\" target=\"_blank\" data-dig-id=\"LP-92318-9a0586dd\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"tax resident\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">tax resident<\/a>&nbsp;and file income tax in Canada. In addition to&nbsp;Canadian citizens&nbsp;and&nbsp;permanent residents,&nbsp;temporary foreign workers&nbsp;and international students living in Canada may qualify as tax residents if they were in Canada for at least 183 days during the year.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Have an income.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Be 71 years of age or younger. There is no minimum age requirement.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p>You can typically contribute to your RRSP until December 31st of the year in which you turn 71. However,&nbsp;<strong>there\u2019s a maximum limit to how much you can contribute in a particular year, so you must have RRSP deduction room available.<\/strong><\/p>\n\n\n\n<p>In addition to your own RRSP, you can also use your contribution room to contribute to a spousal RRSP until December 31st of the year in which they turn 71 years of age.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">When can newcomers to Canada start contributing to an RRSP?<\/h3>\n\n\n\n<p>As a newcomer, you\u2019re only able to contribute to an RRSP&nbsp;<strong>after<\/strong>&nbsp;you file your first&nbsp;income tax return&nbsp;in Canada. This means you won\u2019t be able to contribute the year you arrive.&nbsp;<\/p>\n\n\n\n<p>Once you file your first tax return, the&nbsp;<a href=\"https:\/\/www.canada.ca\/en\/revenue-agency.html\" target=\"_blank\" data-dig-id=\"LP-92318-214b9ec3\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Canada Revenue Agency (CRA)\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">Canada Revenue Agency (CRA)<\/a>&nbsp;will provide you with a Notice of Assessment, which will specify how much you\u2019re allowed to contribute to the RRSP based on your prior year\u2019s income.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is RRSP contribution room?<\/h2>\n\n\n\n<p>RRSP contribution room, also known as the RRSP deduction limit, is the maximum amount you\u2019re allowed to contribute to your RRSP and deduct on your tax return each year, and it is different for everyone. After you file your income taxes, you will receive a notice of assessment from the CRA with information on your deduction limit for the next financial year.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How much can I contribute to RRSP?<\/h3>\n\n\n\n<p>According to the CRA, your contribution room is 18 per cent of your gross income in a particular year, up to a <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/individuals\/topics\/rrsps-related-plans\/contributing-a-rrsp-prpp\/contributions-affect-your-rrsp-prpp-deduction-limit.html#hwddctnlt\" target=\"_blank\" data-dig-id=\"LP-92318-e80555d6\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"maximum annual limit\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">maximum annual limit<\/a>. For 2024, the RRSP annual limit was $31,560 CAD.<\/p>\n\n\n\n<p>It\u2019s also important to note that the RRSP deduction limit is cumulative, so any unused contribution room carries over to the next year.&nbsp;<\/p>\n\n\n\n<p>Log on to your CRA account on the secure CRA portal to find out what your deduction limit is.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What happens if you contribute more than your RRSP deduction limit?<\/h3>\n\n\n\n<p>There are&nbsp;<a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/individuals\/topics\/rrsps-related-plans\/contributing-a-rrsp-prpp\/what-happens-you-over-your-rrsp-prpp-deduction-limit.html\" target=\"_blank\" data-dig-id=\"LP-92318-508f8213\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"penalties for exceeding the RRSP deduction limit\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">penalties for exceeding the RRSP deduction limit<\/a>, so make sure you don\u2019t over-contribute to your RRSP. Usually, if you go over the deduction limit by $2,000 or more, you\u2019ll need to pay 1 per cent tax on the excess contribution each month, unless you withdraw the extra amount.<\/p>\n\n\n\n<p>While calculating how much you\u2019ve contributed to your RRSP in a single year, you should also take into account your employer\u2019s contribution (such as to pooled registered pension plans) and your contributions to your spouse\u2019s RRSP.<\/p>\n\n\n\n<p class=\"has-light-grey-background-color has-background\"><strong>Tip:<\/strong> If you accidentally made an excess contribution and are taking steps to rectify the situation, you can make a written request to the CRA to ask them to consider cancelling the punitive tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to set up an RRSP<\/h2>\n\n\n\n<p>You can open a Registered Retirement Savings Plan account with a&nbsp;Canadian bank, credit union, insurance company, or trust. Financial institutions like the&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/investments\/rrsp.html\" data-dig-id=\"LP-92318-5ee3d27f\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Royal Bank of Canada (RBC)\" class=\"rbc-link-format\">Royal Bank of Canada (RBC)<\/a>&nbsp;offer different types of RRSPs, including ones you can trade in yourself and ones fully managed for you by a portfolio manager. You can&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/dms\/enterprise\/newcomers\/meeting-place.html\" data-dig-id=\"LP-92318-f9ed12c5\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"speak to a newcomer financial advisor\" class=\"rbc-link-format\">speak to a newcomer financial advisor<\/a>&nbsp;for information on the types of RRSPs available and the investments you can keep in them.<\/p>\n\n\n\n<p>Your employer may also enrol you in a&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/business\/advice\/registered-pension-plan-and-group-retirement-savings\/index.html\" data-dig-id=\"LP-92318-30699d77\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"group RRSP\" class=\"rbc-link-format\">group RRSP<\/a>&nbsp;or a Pooled Retirement Pension Plan (PRPP) as part of your benefits package. In this case, the employer will set up an account with a financial institution and make&nbsp;payroll deductions&nbsp;for your share of contributions. Some employers also fully or partially match employee contributions to the PRPP.<\/p>\n\n\n\n<p class=\"has-light-grey-background-color has-background\"><strong>Note:<\/strong> You can only deduct&nbsp;your own&nbsp;PRPP contributions on your income tax return. Contributions made by your employer are not tax-deductible.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is the deadline for RRSP contributions?<\/h2>\n\n\n\n<p>RRSP contributions for a given year must be made by the beginning of March of the following year. For instance, for 2025, you can contribute to your RRSP within the limit indicated in your 2024 notice of assessment between March 1, 2024, and March 3, 2025.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Withdrawing from your RRSP before retirement<\/h2>\n\n\n\n<p>While the RRSP is a retirement savings plan, you can withdraw funds from it earlier if you are not in a locked-in plan. However, in most cases, the money you withdraw is subject to a withholding tax of between 10 and 30 per cent, depending on the amount you withdraw. You will also need to include this as \u2018income\u2019 in your tax return. However, if you\u2019re withdrawing money through the&nbsp;<a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/individuals\/topics\/rrsps-related-plans\/what-home-buyers-plan.html\" target=\"_blank\" data-dig-id=\"LP-92318-80bb81f2\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Home Buyers\u2019 Plan (HBP)\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">Home Buyers\u2019 Plan (HBP)<\/a>&nbsp;or&nbsp;<a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/individuals\/topics\/rrsps-related-plans\/lifelong-learning-plan.html\" target=\"_blank\" data-dig-id=\"LP-92318-aa7e964c\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Lifelong Learning Plan\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">Lifelong Learning Plan<\/a> within your RRSP, you don\u2019t have to pay tax on the withdrawal.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What is the Home Buyer\u2019s Plan (HBP)?<\/h3>\n\n\n\n<p>The Home Buyers\u2019 Plan allows you to withdraw up to $60,000 from your RRSP to buy or build a home. You\u2019ll need to repay the amount to your RRSP within 15 years.<\/p>\n\n\n\n<p>As a newcomer, if you plan to buy your first home in Canada, the Home Buyer\u2019s Plan is a great way to fully or partially&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/en-ca\/my-money-matters\/life-events\/new-to-canada\/settling-in-canada\/save-downpayment-home\/\" data-dig-id=\"LP-92318-a7aa5dfc\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"fund your down payment\" class=\"rbc-link-format\">fund your down payment<\/a>. You can even use the HBP to make a larger down payment and reduce your&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/mortgages\/index.html\" data-dig-id=\"LP-92318-ed2d7aa1\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"mortgage amount\" class=\"rbc-link-format\">mortgage amount<\/a>.<\/p>\n\n\n\n<p>You may qualify for the HBP if you meet all of the following criteria:<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>You\u2019re a&nbsp;<a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/individuals\/topics\/rrsps-related-plans\/what-home-buyers-plan\/participate-home-buyers-plan.html\" target=\"_blank\" data-dig-id=\"LP-92318-d5f4b54d\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"first-time home buyer\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">first-time home buyer<\/a>.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>You have a written agreement to buy or build a home for yourself or a family member with a disability.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>You\u2019re a resident of Canada when you make the withdrawal and when you buy or build the home.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The home will be your principal residence (or that of the disabled family member) within one year of purchase or construction.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The funds you intend to withdraw have been in your RRSP for at least 90 days.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p>When you withdraw funds under the Home Buyer\u2019s Plan, the CRA will send you an HBP Statement of Accounts listing the amount you need to repay the following year. Typically, your repayments will be split equally across the 15-year repayment period, so if you withdraw $60,000 under the HBP, you\u2019ll have to repay $4,000 per year. If you pay less than the required amount in a given year, you\u2019ll have to declare the difference as \u2018income\u2019 and pay tax on it.&nbsp;<\/p>\n\n\n\n<p>Note that if you are saving for the future and plan to buy your first home in Canada, you can also open a <a href=\"https:\/\/www.rbcroyalbank.com\/investments\/fhsa.html\" data-dig-id=\"LP-92318-210a47fa\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"First Home Savings Account\" class=\"rbc-link-format\">First Home Savings Account<\/a> in addition to your RRSP, to invest and grow your savings for a down payment on a home.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What is the Lifelong Learning Plan (LLP)?<\/h3>\n\n\n\n<p>The Lifelong Learning Plan may be beneficial if you (or your spouse) plan to&nbsp;pursue further education in Canada.<\/p>\n\n\n\n<p>The LLP allows you to withdraw up to $10,000 per year from your RRSP to fund&nbsp;<strong>full-time<\/strong>&nbsp;education or training for yourself, or your spouse or common-law partner. You need to repay the amount you withdraw within 10 years.&nbsp;<\/p>\n\n\n\n<p>To qualify for the LLP, you must:<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Be a tax resident of Canada.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Be enrolled or have received an offer to enrol as a full-time student in a qualifying&nbsp;study program&nbsp;at a designated learning institution (DLI) before March of next year.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p>If you become a non-resident of Canada for tax purposes after making an LLP withdrawal, you need to include the remaining LLP balance in your tax return and pay income tax on it.<\/p>\n\n\n\n<p class=\"has-light-grey-background-color has-background\"><strong>Note:<\/strong> You&nbsp;cannot&nbsp;use the LLP to finance your children\u2019s education. Read our article on&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/en-ca\/my-money-matters\/inspired-investor\/investing-academy\/what-is-an-resp-and-how-does-it-work-key-things-you-need-to-know-about-this-popular-savings-tool\/\" data-dig-id=\"LP-92318-3fa64687\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Registered Education Savings Plans (RESPs)\" class=\"rbc-link-format\">Registered Education Savings Plans (RESPs)<\/a>&nbsp;for more information on saving for your children\u2019s education.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Withdrawing money or receiving income from your RRSP at the time of retirement<\/h2>\n\n\n\n<p>When you retire, you can withdraw the funds in your RRSP as a lump sum or in the form of regular income. You can choose to start these withdrawals or payments as early as you want, but since the withdrawals from your RRSP count as income, you will have to pay taxes on them. Usually, after retirement, RRSP holders find themselves in a lower tax bracket, and as such, pay less tax on their RRSP withdrawals than they would have when they were earning a salary.<\/p>\n\n\n\n<p>The year you turn 71 years of age, you\u2019ll have the option to withdraw all funds and close the account; transfer your RRSP to a Registered Retirement Income Fund (RRIF); or use the funds to purchase an annuity.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Withdrawing funds from your RRSP<\/h3>\n\n\n\n<p>You can withdraw funds from your RRSP before or after retirement, until you turn 71 years of age. However, your financial institution is required to withhold tax from your withdrawals and you\u2019ll need to declare the amounts as income on your tax return.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Registered Retirement Income Fund (RRIF)<\/h3>\n\n\n\n<p>After you retire, your bank or financial institution can transfer your RRSP assets to a&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/investments\/rrif.html\" data-dig-id=\"LP-92318-365cc57c\" data-dig-label=\"Registered Retirement Income Fund\" data-dig-action=\"link click\" data-dig-category=\"LP\" class=\"rbc-link-format\">Registered Retirement Income Fund<\/a>. Once you set up an RRIF, you can no longer contribute to your RRSP, and the RRIF cannot be terminated except in the event of your death.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Receiving income from your RRIF<\/h4>\n\n\n\n<p>From the year your RRIF is set up, you will receive a minimum yearly payment from it for your entire life. This minimum amount will be determined by your financial institution, depending on your age, the balance in your RRIF account, and the expected rate of return. You can choose to withdraw more than the minimum amount. The income you receive from RRIF is taxable, so you need to declare it in your tax return and pay tax on it each year. Upon the death of an RRIP holder, the remaining amount can be transferred to the RRSP, RRIF, PRPP or annuity account of an&nbsp;eligible beneficiary.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Using RRSP funds to purchase an annuity<\/h3>\n\n\n\n<p>An&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/retirement\/saving-planning\/retirement-income-sources.html\" data-dig-id=\"LP-92318-8151966b\" data-dig-label=\"annuity&nbsp;\" data-dig-action=\"link click\" data-dig-category=\"LP\" class=\"rbc-link-format\">annuity<\/a> is a financial product that guarantees an income for a certain term or for life. Depending on the product you choose, you may receive a fixed or variable payment throughout your term, or for the rest of your life. With some types of annuities, you may also have the option to continue your annuity to support your spouse or beneficiary after your death.<\/p>\n\n\n\n<p>Many financial institutions give you the option to transfer your RRSP funds directly to an annuity when or before you turn 71. Your financial institution will not withhold taxes from the RRSP funds being used to purchase an annuity, but you\u2019ll need to pay taxes on the annual income you receive from the annuity.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">RRSP versus TFSA: Which is better?<\/h2>\n\n\n\n<p>One of the questions newcomers to Canada commonly ask is whether an RRSP is better than a\u00a0<a href=\"https:\/\/www.rbcroyalbank.com\/investments\/tfsa.html\" data-dig-id=\"LP-92318-c393194f\" data-dig-label=\"Tax Free Savings Account (TFSA)\" data-dig-action=\"link click\" data-dig-category=\"LP\" class=\"rbc-link-format\">Tax Free Savings Account (TFSA)<\/a>. There are several differences between TFSA and RRSP and each plan has its advantages. However, if you do need to choose between the two, keep the following in mind and select the plan that best fits your specific situation and goals:<\/p>\n\n\n\n<table class=\"table-swipe wp-block-rbc-responsive-table-block\"><thead><tr><th scope=\"col\"><\/th><th scope=\"col\">RRSP<\/th><th scope=\"col\">TFSA<\/th><\/tr><\/thead><tbody><tr><td><strong>Contributing as a newcomer<\/strong><\/td><td>You can start contributing the year after you arrive, once you\u2019ve filed your first tax return in Canada<\/td><td>You can start contributing the year you arrive in Canada<\/td><\/tr><tr><td><strong>Tax treatment for contributions<\/strong><\/td><td>Contributions made from pre-tax income (Contributions are tax-deferred or taxable upon withdrawal)<\/td><td>Contributions made from after-tax income<\/td><\/tr><tr><td><strong>Tax treatment for earnings<\/strong><\/td><td>Taxable on withdrawal<\/td><td>Tax-free withdrawals<\/td><\/tr><tr><td><strong>Contribution limit for 2024<\/strong><\/td><td>18 per cent of income or $31,560, whichever is less (plus unused contribution room from previous years)<\/td><td>$7,000 (plus unused contribution room from previous years)<\/td><\/tr><tr><td><strong>Withdrawal flexibility<\/strong><\/td><td>Withdrawals are taxable, except for Home Buyer\u2019s Plan or Lifelong Learning Plan, which must be repaid within a specified term<\/td><td>Can withdraw at any time for any purpose<\/td><\/tr><tr><td><strong>Expiry date<\/strong><\/td><td>Must withdraw or convert into RRIF or annuity the year you turn 71<\/td><td>No expiration<\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\">Should you invest in an RRSP if you don\u2019t plan to retire in Canada?<\/h2>\n\n\n\n<p>If you plan to move abroad or return to your home country before retirement, you can still benefit from the RRSP. You are not required to close your RRSP account if you leave Canada permanently and your savings in the plan can continue to grow.&nbsp;<\/p>\n\n\n\n<p>However, <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/individuals\/topics\/rrsps-related-plans\/making-withdrawals\/tax-rates-on-withdrawals.html\" target=\"_blank\" data-dig-id=\"LP-92318-5d1df0ad\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"RRSP&nbsp;withdrawals by non-residents are subject to a 25 per cent non-resident withholding tax\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">RRSP&nbsp;withdrawals by non-residents are subject to a 25 per cent non-resident withholding tax<\/a>. Make sure you calculate the projected return on your RRSP savings and factor that into your plans.<\/p>\n\n\n\n<p>Investing in an RRSP is a great way to get a head start on your retirement planning in Canada. Not only will your savings continue to grow till the time you turn 71, but the money you put into the RRSP can significantly lower your tax liability throughout your working life. Moreover, an RRSP offers you the flexibility of borrowing funds for some major life expenses, such as&nbsp;purchasing a home&nbsp;or continuing your education, making it an investment plan of choice for many financially prudent Canadians.<\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Can newcomers to Canada open an RRSP? Yes, they can. Read on to understand how RRSPs work, what the annual contribution limit is, what the withdrawal rules are, how you can use savings in your RRSP to buy a home in Canada, and more.<\/p>\n","protected":false},"author":80,"featured_media":92317,"parent":57308,"menu_order":0,"template":"wp-custom-template-optimizely-mmm","meta":{"_acf_changed":false,"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","footnotes":""},"tags":[518,92,48],"rbc_content_type":[31],"rbc_audience":[59],"rbc_lob_group":[154],"rbc_difficulty_level":[33],"rbc_mmm_category":[361,314,316],"class_list":["post-92318","rbc_my_money_matter","type-rbc_my_money_matter","status-publish","has-post-thumbnail","hentry","tag-new-to-canada","tag-rrsp","tag-savings","rbc_content_type-article","rbc_audience-newcomer","rbc_lob_group-newcomer","rbc_difficulty_level-beginner","rbc_mmm_category-banking-in-canada","rbc_mmm_category-life-events","rbc_mmm_category-new-to-canada"],"acf":{"contently_publication_id":"","custom_author":"Royal Bank of Canada","rbc_video_header":"","rbc_media_duration":"","rbc_toc_for_mmm_tag":"h2","rbc_toc_for_mmm_limit":6,"rbc_toc_for_mmm":null,"rbc_toc_for_mmm_action":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<meta name=\"description\" content=\"Investing your savings in Canada? 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