Deposits held in a RRSP (2024)

FAQs

What is the equivalent of RRSP in the USA? ›

An RRSP can be considered the Canadian equivalent of the American 401(k), and vice versa. Both are retirement plans designed to encourage savings with similar tax benefits.

Registered Retirement Savings Plan (RRSP)

Setting up, contributing, transferring, and claiming deductions for plans for yourself or your spouse or common-law partner.

An RRSP is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute.

401(k)s and Registered Retirement Savings Plans (RRSPs). have key similarities and differences, but both help citizens save money and allow it to grow tax-free. RRSPs are more portable than 401(k)s because they can be opened by a private citizen; 401(k)s are only available via employers.

Is Canadian RRSP equivalent to Traditional IRA? In comparison, Canadian RRSP is equivalent to traditional IRA. The IRA (individual retirement account) and RRSP (Registered retirement savings plan) offer the same financial path and tax advantages in savings for retirement.

There is less freedom in how you can withdraw from an RRSP, compared to a TFSA. Withdrawals are classed as taxable income (unlike TFSA withdrawals). Low-income earners pay a low rate of income tax, so RRSPs don't make financial sense for this kind of investor (a TFSA would probably be a better option).

An RRSP is a type of registered investment account, which means you can hold income-generating investments in it versus just cash (like a savings account). The types of investments you can buy in your RRSP depend on where you open an account. You also want to consider your appetite for risk when choosing investments.

As long as your RRSP isn't a locked-in plan, you can take money out of your RRSP any time. However, any amount you withdraw will be included as income for tax purposes. You'll also pay withholding tax on the amount you withdraw (based on the amount of the withdrawal).

Is the money in an RRSP safe? ›

Tip: In general, the more equity investments you hold in your RRSP (such as stocks or equity mutual funds), the higher your risk of losses will be. The more investments you have that pay interest, such as bonds or Guaranteed Investment Certificates (GICs), the lower the risk of losing money.

An RRSP is a great retirement savings vehicle for dual citizens, expats and Canadians. One should not transfer an IRA to an RRSP.

What can you hold in your RRSP? Like other registered savings plans, RRSPs can hold savings deposits and investments. Qualified investments – allowed to be held in an RRSP – include cash, gold, GICs, bonds, mutual funds, ETFs, and more. Investments that cannot be held in an RRSP include precious metals, commodity.

For U.S. tax purposes, an RRSP is treated as an investment account, and an election to defer taxation of accrued income is deemed to be made when the RRSP is disclosed on foreign bank account reporting forms.

The FHSA has similar tax benefits to RRSPs and TFSAs. Like an RRSP, your FHSA contributions are tax-deductible and will grow tax-free¹. Like a TFSA, you can make tax-free withdrawals² from your FHSA for qualified purchases.

Both types of accounts shelter interest and investment income from tax. TFSA contributions are not tax-deductible. The tradeoff, however, is that withdrawals from a TFSA are tax-free. RRSP contributions are tax-deductible, which means that they can help reduce the amount of tax you pay for that year on your income.

Key Takeaways. The Canadian Registered Retirement Savings Plans and the Tax-Free Savings Account are similar to U.S. traditional and Roth IRAs. Canadian retirement accounts have more generous contribution limits and fewer distribution limits than American accounts.