A Registered Retirement Savings Plan (RRSP) is a tax sheltered, personal savings plan that you can easily set up to help finance your retirement. Contributions are deductible from your taxable income, which helps lower your income taxes now. Capital gains and income you earn within the plan grow tax free and are only taxed when you withdraw from the plan.

How do you contribute to an RRSP?

Setting up an RRSP account with your investment advisor or bank is simple. "To make it easier to contribute, set up an automatic weekly or monthly transfer from your bank account into your RRSP account," says Roland Chalupka, V.P., Fiduciary Trust Co. of Canada.

What's the annual deduction limit?

For 2006, you can contribute up to 18 per cent of your previous year's income, to a maximum of $18,000, into your RRSP. If you're making contributions to your company's pension plan, make sure you take into account that a pension adjustment will affect the following year's RRSP contribution limit. Refer to your latest Notice of Assessment from Canada Revenue Agency for your RRSP deduction limit. If you don't maximize your RRSP contributions every year, they can be carried over to future years.

Will the government take care of you in retirement?

The Government of Canada currently provides Canada Pension Plan (CPP) and Old Age Security (OAS), but they are not intended to meet all of your retirement needs. Note that OAS is subject to clawbacks.

"If you plan on maintaining your current lifestyle, you may need to save extra for your retirement and that's where an RRSP comes into play," said Chalupka. More information on retirement planning is available on websites like www.fiduciarytrust.ca.

How can you diversify your RRSP?

Since the government eliminated the foreign content limit, you can now diversify globally without any restrictions. Chalupka adds, "Ask your investment advisor about how global investing can provide additional opportunities for growth and diversification."