How does RRSP work in Canada?
Every dollar you save in a RRSP is deducted from your taxable income - making the tax you would pay lower. You are only deferring paying the tax on these savings till whenever you should draw them out. Theory being at retirement when you are not working - thus in a lower tax bracket
I would guess pretty similar to 401k.We are allowed a percentage of our wage put in rrsps without being taxed.The idea is when you take it out later, it will have accrued untouched and then taxed at a lower rate, presuming your income is less than when you worked.The maximum per year goes up to about 14000 I think.
It works very well indeed.
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