What is an RRSP?

• A. A savings plan funded by the government for low-income families
• B. A Registered Retirement Savings Plan that encourages Canadians to save for their retirement
• C. A child care subsidy program
• D. A universal basic income program

Answer: (B)

An RRSP is a Registered Retirement Savings Plan, a Canadian savings vehicle designed to help people set aside money for retirement with tax advantages. When you contribute, you often get a deduction against your current year’s income, which can lower the taxes you owe now. The investments inside the plan grow without being taxed each year, so your money can compound more efficiently. Taxes are paid later when you withdraw the funds, typically in retirement when your income—and possibly your tax rate—may be lower. You can convert the RRSP into other retirement vehicles like a RRIF or an annuity as you approach or enter retirement. There are annual contribution limits to keep in mind, and over-contributing can lead to penalties. This is different from government-funded programs or subsidies; it’s a personal savings vehicle designed to boost retirement income through tax-advantaged growth.