What is an RSP (Retirement Savings plan)?
A registered Retirement Savings Plan (RSP) is an investment tool geared toward saving money for your retirement years. These plans have special tax benefits as designated by the Canadian Government. Your annual RSP money contributions can greatly lower the amount of income tax you must pay in that year, and the money placed in an RSP can have years of tax-deferred growth potential.  The key is that you only pay tax on the amounts you withdraw.

Why do you need an RSP?
The maximum yearly pension an individual Canadian can currently receive from the Canada Pension Plan is just over $10,000.00 if it’s taken at age 65 (as of 2006). It would be unwise to rely on government pension plans alone for your retirement income once you’re 65. An RSP can make up the difference and help you maintain your current standard of living once you retire.

In addition, your taxable income will be reduced each year by the amount of the eligible contribution. So, the more you contribute, the less income tax you'll pay in the year that you make the contribution.

Should you be contributing to an RSP now?
Yes! Contribute as much as you can comfortably afford, as soon as you can. Even small, regular contributions can build over time into a significant retirement savings. Canada Revenue Agency (CRA) makes it easy for you to know the exact amount you can contribute to your RSPs each year. For your limit for the current year, simply refer to your Notice of Assessment. This government notice outlines the maximum amount of money you may contribute in the current year, including any unused contribution room carried forward from previous years.