Your first date with RRSPs

A huge advantage of getting started early is decades of tax-free compounding

Ashley Redmond 22 March, 2010 | 6:00PM

Opening your first RRSP is like going on a first date: It feels a little uncomfortable, the other party provides too much information, and ultimately you'll need to make a decision.

Before you take the plunge, you need to understand what you're getting into. The RRSP (Registered Retirement Savings Plan) is often called the "Great Canadian Tax Break."

Anyone who files a tax return can open an RRSP, and claim a deduction that allows them to defer taxes. The amount that you can contribute will depend on your earned income, but there are limits. The ceiling for 2010's RRSP contribution -- which isn't an issue for most young investors -- is $22,000.

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Ashley Redmond

Ashley Redmond  Ashley Redmond is a Vancouver-based freelance writer.

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