Unsure of the best way to plan for your retirement? Registered Retirement Savings Plans (RRSPs) are one of the most popular retirement savings plans in Canada.
In fact, according to Statistics Canada, it remains one of the three “pillars” of Canadians’ retirement income systems, with RRSPs accounting for 29 per cent of the share of elderly Canadians’ total income, according to latest available data from 2020.
But while RRSPs have some clear benefits, they also come with pitfalls that can affect your long-term financial health.
Below, I’ll briefly explain how RRSPs work and outline some of the drawbacks of using an RRSP as your sole retirement plan. Then, I’ll share some viable alternatives to help you better prepare for retirement!
How do RRSPs work?
The RRSP was introduced by the government in 1957 to bridge the gap between everyday workers and those who already enjoyed the tax benefits of registered retirement pension plans.