What is the purpose of a Registered Retirement Savings Plan (RRSP)?

A Registered Retirement Savings Plan (RRSP) serves the primary purpose of enabling individuals to save for retirement while benefiting from significant tax advantages. Contributions made to an RRSP are tax-deductible, which reduces an individual's taxable income for the year the contribution is made. This means that during the contribution period, individuals can enjoy lower immediate tax liabilities. The income earned within the RRSP, including interest, dividends, and capital gains, is also tax-deferred until withdrawal, typically during retirement, when the individual may fall into a lower tax bracket.

By allowing funds to grow tax-free until withdrawal, RRSPs encourage long-term savings and help individuals adequately prepare financially for retirement. This not only facilitates financial stability in later years but also promotes responsible savings habits throughout a person's working life.

In contrast, the other options do not accurately reflect the primary purpose of an RRSP. For instance, while immediate income tax benefits may be perceived as a feature, they do not represent the primary goal of retirement savings. Additionally, suggesting that an RRSP functions as a savings plan with no tax advantages negates the significant benefits it provides. Lastly, the idea that an RRSP only serves to invest in real estate overlooks the broader range of investment options available within an