What is the Difference Between RSP and RRSP?
🆚 Go to Comparative Table 🆚The key difference between an RSP (Retirement Savings Plan) and an RRSP (Registered Retirement Savings Plan) is that RSP is used before the account is registered with the Canada Revenue Agency (CRA), while RRSP refers to the registered account. Both RSP and RRSP are used interchangeably, as the most common type of RSP is the Registered Retirement Savings Plan or RRSP.
An RRSP is a plan registered with the CRA, allowing deductible RRSP contributions to reduce taxable income. Contributions to an RRSP are tax-deductible, typically limited to 18% of the pre-tax earnings from the previous calendar year or the CRA's maximum for contributions, whichever is less. Unused contribution room is carried forward every year and added to the next year's contribution, allowing for catch-up contributions later.
In summary:
- RSP stands for Retirement Savings Plan and encompasses various types of savings vehicles, including RRSPs.
- RRSP stands for Registered Retirement Savings Plan, which is a specific type of RSP registered with the CRA.
- Both RSP and RRSP are often used interchangeably, as the most common type of RSP is the RRSP.
Comparative Table: RSP vs RRSP
The main difference between a Retirement Savings Plan (RSP) and a Registered Retirement Savings Plan (RRSP) lies in their tax-advantaged nature. Here is a comparison table of the two:
| Feature | Retirement Savings Plan (RSP) | Registered Retirement Savings Plan (RRSP) |
|---|---|---|
| Definition | RSP is a general category that includes any account used by individuals or couples to build up a nest egg for their financial security once they've retired. | RRSP is a specific type of RSP with tax advantages that are better than having assets or other investments for retirement. |
| Tax-Advantaged | RSP is a tax-advantaged retirement savings account that helps you save money for retirement. | RRSP contributions are tax-deductible to a specified limit every year, normally 18% of the pre-tax earnings from the previous calendar year or the limit set by the CRA, whichever is less. |
| Types of Accounts | RSP includes various types of retirement savings accounts like Registered Retirement Income Fund (RRIF), Specified Pension Plan (SPP), and Registered Pension Plan (RPP). | RRSP is a specific type of RSP that can only be opened with financial institutions approved by the CRA. |
In summary, an RSP is an umbrella term that includes a wide variety of retirement savings vehicles, while an RRSP is a specific type of RSP with tax advantages.
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