Canadian RRSP Information


A registered Retirement Savings Plan (RSP) is an investment account designed primarily for saving toward your retirement years. As a retirement savings vehicle, regulated by the Canadian government, RSPs have special tax benefits. Your annual RSP contribution can greatly reduce the amount of income tax you pay in that year, and the money you put away can have years of tax-deferred growth potential. You only pay tax on the amounts you withdraw. RSPs are available through chartered banks, trust companies and other financial institutions.

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Be aware that if you are an American, serve in Canada and open an RRSP and then move back to the U.S., RRSP's are not counted as retirement accounts by the U.S. or the states.   There are also reporting requirements to the Feds and the States.  First, when you make withdrawals you will take a 25% tax hit from Canada unless you turn it into a RIFF, then it is 15%.  Second in the U.S. the amount in the account when you enter the country is tax free, only the growth after entrance into the U.S. is taxed (provided you have jumped through the necessary reporting hoops).  There are complicated formulas to figure which is which out on an annual basis.   The states vary.  In California, for example, the account is treated more or less as a taxable investment account and you pay taxes on your dividends every year (they do not grow tax free).  Only the amount in the account before entering the country (or state, that part of it is not clear) is considered tax free.  Again, upon taking distributions in retirement there will be complicated formulas for determining what is tax free and what is taxable.  There is, however, a foreign tax credit for the taxes you pay in Canada.