Certified Financial Planner (CFP) Practice Exam · Question
What is the primary purpose of a Registered Retirement Savings Plan (RRSP) in Canada?
RRSPs allow individuals to save for retirement on a tax-deferred basis, meaning contributions and investment growth are not taxed until withdrawn.
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Question: What is the primary purpose of a Registered Retirement Savings Plan (RRSP) in Canada?
Answer options:
- To save for a child's education
- To provide tax-free income in retirement ✅ To defer income tax on contributions and investment growth until withdrawal
- To invest in foreign equities without limit
Correct answer: To defer income tax on contributions and investment growth until withdrawal
Explanation: RRSPs allow individuals to save for retirement on a tax-deferred basis, meaning contributions and investment growth are not taxed until withdrawn.
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