Your contributions to the plan are allowed to accumulate, along with investment income, on a tax-free basis until the funds are withdrawn during your retirement years. This delay is significant because, although the funds will be fully taxable at that time, you will likely have entered a lower-earning phase of your life, and your tax rate will be lower.

RRSPs are registered with the Canada Revenue Agency, and their issuance is supervised by an approved financial institution to ensure that rules are strictly followed.

Canadians can contribute to their RRSPs up until the year they turn 69. At that point, RRSPs must be closed down. Investors can then withdraw money or convert it into a Registered Retirement Income Fund or annuity that will pay regular income. In both cases, any money received is taxed.