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Tax-deferred accounts

Tax-deferred accounts allow you to realize immediate tax deductions up to the full amount of your contribution, but future withdrawals from the account will be taxed at your ordinary income rate. The most common is a registered retirement savings plan (RRSP).


If your taxable income this year is $60,000, for example, and you contribute $5,000 to a tax-deferred account, you would pay tax on only $55,000. Once you retire, if your taxable income is initially $50,000, but you decide to withdraw $8,000 from the account, your taxable income would be bumped up to $58,000.

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