Me, contribute to an RRSP?

The RRSP RRSP: (Registered Retirement Savings Plan) Savings method that allows you to put savings in tax-sheltered investments during your active life to supplement your income when you retire. Your RRSP savings will not be taxed until you withdraw them.   is certainly the ideal tool to help pave the way to retirement and make your dreams come to life.

What is an RRSP, exactly?

The Registered Retirement Savings Plan, commonly called RRSP, offers a way to save now to supplement your retirement income later. The government-sponsored plan allows you to postpone paying income taxes on the portion of your income that you invest in your RRSP.

The principle is simple: the amount you invest in an RRSP is deducted from your annual taxable income, allowing you to save on income taxes. The major advantage of the plan is that the tax-exempt amount that you set aside in your RRSP will likely be taxed at a lower rate when you decide to withdraw it.

How is this possible?

What's important to understand is you don't normally withdraw the money accumulated in an RRSP until you retire, when your income is generally lower. Because your income is lower, so is the rate at which you pay income taxes.

You can also decide to take money out of your RRSP if you are temporarily out of work or on maternity leave. Again, because your annual income is lower, your taxes will be lower too.

And did you know that an RRSP can be used to other ends than just to retire? You can use it to purchase your first home or go back to school without tax consequences.

Another important note: all of the interest, dividends Dividends: Part of the earnings of a company that is paid to its shareholders, who receive an amount in proportion with the number of shares they hold.   and capital gains Capital gains: Profit from the sale of capital assets (i.e., long-term assets such as stocks, bonds, land or businesses).   earned in your RRSP investment Investment: Amount of money invested to generate profit. s compounds tax-free. Your Desjardins caisse even gives you the opportunity to earn member dividends on your RRSP savings.

Finally, don't forget that the most flexible and effective way to make your RRSP grow is through regular instalments Regular instalment: Amount withdrawn regularly from an account and automatically placed in a savings account or an investment or used to pay off a loan. . You determine the amount you want to set aside and the frequency of payments. And you can increase or decrease the amount at any time.

There's no doubt about it. RRSPs offer great tax advantages!

This column was written by Mélanie Lefebvre, Youth Focus Advisor at the Caisse populaire Desjardins de Mont-Tremblant.