What's the difference between an RRSP and a 401(k)?

Both are tax-deferred retirement accounts: you deduct contributions today and pay tax on withdrawals later. The RRSP is Canadian and has individual contribution room (18% of earned income up to an annual cap, carried forward). The 401(k) is a US employer-sponsored plan with a fixed annual contribution limit ($24,500 in 2026, plus catch-up) and often includes an employer match. They work similarly but differ in the details.

What's the difference between a TFSA and a Roth IRA?

Both let you grow money tax-free and withdraw tax-free in retirement, funded with after-tax dollars. The TFSA is Canadian, has annual contribution room (about $7,000 in 2025) that accumulates from age 18, and allows any type of withdrawal at any time. The Roth IRA is American, has a smaller annual limit ($7,000 in 2025, $8,000 if 50+), is subject to income phase-outs, and has a 5-year rule on earnings withdrawals before 59½.

Is RRIF the same as RMD?

Conceptually yes — both are government-mandated minimum withdrawals from tax-deferred retirement accounts. The RRIF minimum applies in Canada (starting the year after you convert your RRSP, by age 71). The RMD applies in the US (starting at age 73 for most current retirees, rising to 75 under SECURE 2.0). The percentages and starting ages differ, but both force taxable income out of sheltered accounts.

What does 'OAS clawback' actually mean?

OAS (Old Age Security) is Canada's universal retirement benefit, but it's clawed back at 15 cents per dollar once your net income exceeds about $95,300 (2026), fully eliminated around $155,300. It's effectively a 15% surtax on income above the threshold for OAS recipients. The US equivalent for Medicare premiums is IRMAA, a similar income-based surcharge.

Retirement Planning Glossary: 50+ Terms Defined

Retirement planning has its own vocabulary, borrowed from tax law and finance, and a lot of acronyms that look alike across countries but mean different things. This glossary defines the terms you’ll meet, with links to deeper guides where they exist. Use it as a reference while reading other articles, or skim it once.

Terms are grouped by category. Use your browser’s find-in-page (Ctrl+F / ⌘+F) to jump to any acronym.

Account Types — Canada

RRSP (Registered Retirement Savings Plan)

A tax-deferred retirement account where contributions reduce your taxable income today and withdrawals are fully taxed as income later. Annual contribution room is 18% of earned income up to a federal cap (about $32,490 in 2025), with unused room carrying forward indefinitely. It is the largest retirement asset for most Canadians. See the RRSP meltdown strategy guide for how to draw it down efficiently and the TFSA vs RRSP comparison for which to prioritize.

TFSA (Tax-Free Savings Account)

A tax-free account where contributions are made with after-tax dollars, but all growth and withdrawals are completely tax-free. Annual contribution room (about $7,000 in 2025) accumulates from age 18, and withdrawn amounts are added back to your room in the following calendar year. Unlike the RRSP, withdrawals don’t count as income for OAS or GIS purposes, which makes the TFSA the most flexible retirement account in Canada. Compare TFSA vs RRSP before deciding which to fund first.

FHSA (First Home Savings Account)

A hybrid account with RRSP-style deductions and TFSA-style tax-free withdrawals, for first-time home buyers only. Lifetime contribution limit is $40,000 ($8,000 per year), and unused funds can be rolled to an RRSP if you never buy. See the FHSA complete guide for eligibility and stacking rules with the Home Buyers’ Plan.

RRIF (Registered Retirement Income Fund)

The mandatory successor account to an RRSP. By December 31 of the year you turn 71, you must convert your RRSP into a RRIF (or annuitize it). Starting at age 72, you must withdraw a minimum amount each year: 5.40% at 72, rising to 20% at 95+. The RRIF minimum withdrawal guide has the full schedule.

LIRA (Locked-In Retirement Account)

A locked-in version of an RRSP that holds pension money you’ve transferred out of an employer plan. You can’t contribute to it or make ad-hoc withdrawals — funds stay locked until retirement age (usually 55), then must be converted to a LIF or annuity. See LIRA and LIF explained for unlocking rules by province.

LIF (Life Income Fund)

The income-stage counterpart to a LIRA. Like a RRIF, it has mandatory minimum withdrawals, but unlike a RRIF it also has a yearly maximum based on your age and the LIF balance. This is meant to make pension money last a lifetime. Full mechanics in LIRA and LIF explained.

RDSP (Registered Disability Savings Plan)

A long-term savings vehicle for people eligible for the Disability Tax Credit. Contributions are not deductible, but the government adds matching grants (CDSG) and bonds (CDSB), up to $90,000 in lifetime government contributions for low-income beneficiaries. Withdrawals are partially taxable.

RESP (Registered Education Savings Plan)

A tax-deferred account for funding a child’s post-secondary education. The federal Canada Education Savings Grant (CESG) adds 20% on the first $2,500 contributed annually, up to $7,200 lifetime. Education withdrawals are taxed in the student’s hands, usually at near-zero rates. See RESP education savings for contribution strategy.

Spousal RRSP

An RRSP owned by your spouse but funded by you. You get the deduction, and your spouse holds and eventually withdraws the funds. The classic income-splitting tool for couples with very different retirement incomes. Subject to the three-year attribution rule (see below). Strategy details in spousal RRSP strategy.

Non-registered account

A taxable investment account with no contribution limits and no tax shelter. Dividends, interest, and realized capital gains are taxed each year at varying rates. Often the third stop in the savings priority order after TFSA and RRSP are maxed.

Account Types — US

401(k)

An employer-sponsored tax-deferred retirement plan. Contributions reduce taxable income today and withdrawals in retirement are taxed as ordinary income. 2026 limit: $24,500 ($32,500 if age 50+). Many employers match contributions, and skipping the match is one of the most common retirement mistakes.

Traditional IRA

A personal tax-deferred retirement account, contributable by anyone with earned income. 2026 limit: $7,500 ($8,600 if 50+). Deductibility phases out at higher incomes if you have a workplace plan. See Traditional IRA vs Roth IRA for the side-by-side.

Roth IRA

An after-tax personal retirement account where contributions don’t reduce current income, but all growth and qualified withdrawals are completely tax-free. 2026 limit: $7,500 ($8,600 if 50+), subject to income phase-outs ($153K–$168K single, $242K–$252K married). The closest US analog to Canada’s TFSA. Strategy comparison: Traditional IRA vs Roth IRA.

Roth 401(k)

The Roth version of a 401(k): same contribution limit ($24,500 in 2026), no income phase-out, tax-free in retirement. Often the right choice for high earners who can’t directly fund a Roth IRA. Full comparison: Traditional 401(k) vs Roth 401(k).

HSA (Health Savings Account)

The triple-tax-advantaged account: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. After age 65, non-medical withdrawals are taxed like a Traditional IRA, so the HSA can work as one of the best retirement accounts available. See HSA retirement strategy for using it as a stealth IRA.

403(b)

A 401(k) equivalent for employees of public schools, hospitals, and certain non-profits. Same contribution limits and tax treatment as a 401(k), with a few unique catch-up provisions for long-tenured employees.

457(b)

A deferred-compensation plan for state/local government and certain non-profit employees. Same $24,500 limit as a 401(k), and it can be stacked alongside a 401(k) or 403(b), so some government workers can shelter $49,000 per year. No early-withdrawal penalty on separation from service.

SEP IRA

A Simplified Employee Pension IRA for self-employed individuals and small businesses. Contributions are employer-only and can be up to 25% of compensation or $70,000 in 2025, whichever is lower. Easier to administer than a Solo 401(k) but no Roth or employee contribution option.

SIMPLE IRA

A simplified plan for small businesses (under 100 employees). Lower limits than a 401(k) ($16,500 in 2025) but cheaper to administer. The employer must match 3% or contribute 2% for everyone.

529 Plan

A state-sponsored tax-advantaged account for education savings. Contributions are not federally deductible but most states offer a state-tax deduction. Growth is tax-free; qualified withdrawals are tax-free. SECURE 2.0 added a limited 529-to-Roth-IRA rollover provision. See 529 education savings plan.

Taxable brokerage

The US equivalent of Canada’s non-registered account. No contribution limits, no tax shelter, but generally favourable treatment for long-term capital gains and qualified dividends. Often the right home for tax-efficient index funds once tax-advantaged space is filled.

Government Benefits

CPP (Canada Pension Plan)

The federal earnings-based pension. Maximum benefit at age 65 is about $1,508/month (2026), though most retirees receive less. Claiming early (60) reduces the benefit by 36%; claiming late (70) increases it by 42%. The best age depends on the person. See when to take CPP for the math.

OAS (Old Age Security)

A near-universal Canadian retirement benefit based on years of Canadian residency, not earnings. Maximum is about $727/month at 65 (2025), rising 10% at 75. Subject to the clawback above ~$91K of net income. Deferable to age 70 for a 36% boost.

GIS (Guaranteed Income Supplement)

A non-taxable benefit paid to low-income OAS recipients. The clawback is steep, at 50 cents per dollar of other income above a small exemption, which makes GIS one of the most tax-sensitive benefits in Canada. See GIS guaranteed income supplement for the income thresholds and planning strategies.

Provincial supplements (GAINS, SAFER, ASB, SAIP)

Province-specific top-ups for low-income seniors. GAINS (Ontario) tops up GIS recipients up to ~$87/month. SAFER (BC) is a rental assistance program for seniors. ASB (Alberta Seniors Benefit) is means-tested monthly income. SAIP (Saskatchewan Income Plan) is similar. Each has its own income thresholds and interactions with GIS.

The US federal earnings-based retirement benefit. Maximum at full retirement age (currently 67) is about $4,018/month (2025). Claiming as early as 62 reduces the benefit by 30%; delaying to 70 adds 8% per year past FRA. Up to 85% of benefits are federally taxable depending on combined income. See when to take Social Security.

Medicare

US federal health insurance starting at age 65 (with some early-disability exceptions). Part A (hospital) is free for most; Part B (outpatient) has a base premium of about $203/month (2026) that rises with income (see IRMAA). Retiring before 65 means bridging with ACA marketplace coverage — see Medicare before 65 for early retirement or the Spanish version.

The income-based surcharge on Medicare Part B and Part D premiums. Kicks in above $109K (single) or $218K (married) of modified AGI (2026) from two years prior. The brackets are cliffs, not slopes: one dollar over a threshold can cost thousands per year per spouse. That is a major reason Roth conversion timing matters in the US.

Spousal/Survivor benefits

Both CPP and Social Security offer spousal benefits (a percentage of the higher earner’s benefit, paid to the lower earner) and survivor benefits (paid to a surviving spouse after death). Rules differ between the two systems. The US version is detailed in Social Security spousal and survivor benefits.

Tax Concepts

Marginal tax rate

The tax rate on your next dollar of income. If you’re in the 30.5% Ontario combined bracket, every additional $1,000 of taxable income costs $305 in tax. It is the rate that matters for most retirement decisions: RRSP contributions, Roth conversions, asset location.

Effective tax rate

The average tax rate across all your income. Always lower than the marginal rate (assuming you have any income in lower brackets). Useful for cash-flow planning but rarely the right rate for decision-making.

Tax bracket

A range of income taxed at a specific rate. Both Canada and the US use progressive bracket systems — only the income within each bracket is taxed at that bracket’s rate, not your full income. Moving into the next bracket does not raise tax on all your income, though many people think it does.

OAS clawback (officially: OAS recovery tax)

The 15-cent-per-dollar clawback of Old Age Security for net income above about $95,300 (2026), fully recovered around $155,300. Effectively a 15% surtax on income in that band. See OAS clawback: how to avoid it for income-shifting strategies.

Capital gains inclusion rate

In Canada, only a portion of realized capital gains is taxable. The inclusion rate is 50% for individuals. A proposed increase to 66.67% on gains above $250,000 a year was cancelled in March 2025. Inclusion rate matters for the timing of large capital gains realizations, including deemed dispositions at death.

Dividend tax credit

In Canada, eligible Canadian dividends receive a gross-up plus credit treatment that lowers their effective tax rate well below ordinary income. Often the most tax-efficient income for retirees with non-registered holdings.

Standard deduction

In the US, the standard reduction in taxable income for taxpayers who don’t itemize. $15,000 single / $30,000 married (2025), with an additional $2,000 if age 65+. It is the main reason many US retirees can withdraw $30K–$40K with near-zero federal tax.

NIIT (Net Investment Income Tax)

A US federal 3.8% surtax on investment income (dividends, interest, capital gains, rental income) for taxpayers with modified AGI over $200K single / $250K married. Often overlooked in retirement projections. Combined with state taxes and Medicare surtax thresholds, it can push marginal rates past 30%.

Tax-loss harvesting

Selling securities at a loss to offset realized gains or up to $3,000 of ordinary income annually. Works in non-registered (Canada) and taxable brokerage (US) accounts only. The 30-day superficial-loss / wash-sale rule prevents repurchasing identical securities to claim the loss.

Withdrawal Strategies

RRSP meltdown

A systematic plan to withdraw from your RRSP in the gap between retirement and the RRIF mandatory-minimums starting age, taking advantage of low-income years to draw at lower marginal rates. Often paired with delayed CPP/OAS to maximize the low-income window. Full mechanics in the RRSP meltdown strategy guide.

Roth conversion

The US equivalent of the RRSP meltdown — moving money from a Traditional IRA or 401(k) into a Roth IRA, paying tax on the conversion at today’s rates so future growth is tax-free. Best executed in low-income years between retirement and Social Security or RMDs. See Roth conversion strategy.

Roth conversion ladder

A sequence of partial Roth conversions, each year filling specific tax brackets without overflowing into the next. The “ladder” refers to the multi-year schedule. There is no single right amount; the total is spread over 5–15 years depending on bracket headroom and IRMAA thresholds.

RMD (Required Minimum Distribution)

The mandatory annual withdrawal from US tax-deferred accounts (Traditional IRA, 401(k), etc.) starting at age 73 for most current retirees (rising to 75 under SECURE 2.0). Roth IRAs are exempt from owner RMDs. See Required Minimum Distributions (RMD) for the full schedule and tax planning around it.

RRIF minimum

Canada’s equivalent of the RMD — the mandatory annual withdrawal from a RRIF starting at age 72. The percentage rises each year: 5.40% at 72, 6.82% at 80, 11.92% at 90, 20% at 95+. Detailed schedule and conversion mechanics in RRIF minimum withdrawal.

QCD (Qualified Charitable Distribution)

A US-only strategy: direct transfer of up to $108,000/year (2025) from an IRA to a qualified charity. The QCD counts toward your RMD but doesn’t appear on your tax return as income, so it works whether or not you itemize. It is one of the cleanest ways to give for taxpayers over 70½.

4% rule

The classic safe withdrawal rate guideline: start by withdrawing 4% of your retirement portfolio in year one, then adjust that dollar amount for inflation each year. Based on the 1994 Bengen study assuming a 50/50 stock/bond portfolio. It is often misread as a guarantee; the original study showed a 95% success rate over 30 years, not 100%. See spending strategies beyond the 4% rule for adaptive alternatives.

Guyton-Klinger

A set of “guardrail” withdrawal rules: raise spending after strong market years, freeze or cut it after weak ones. Generally supports higher initial withdrawal rates (5–5.5%) than the static 4% rule, at the cost of accepting some real spending volatility.

VPW (Variable Percentage Withdrawal)

A withdrawal method where each year’s spending is calculated as a fixed percentage of the current portfolio balance, with the percentage rising with age. By design you can’t run out of money, but spending can swing a lot with markets. A popular Bogleheads-community alternative to the 4% rule.

Sequence of returns risk

The risk that a poor market sequence in the early years of retirement will permanently impair the portfolio’s ability to sustain withdrawals, even if average long-term returns end up fine. It is why two retirees with identical average returns can have wildly different outcomes if one happened to start in a bad year. Monte Carlo and historical backtesting are designed to quantify this.

Planning Concepts

Monte Carlo simulation

A projection technique that runs thousands of randomized return sequences and reports the percentage that successfully fund your retirement. A 90% success rate means 9 of 10 simulated futures didn’t run out of money. See Monte Carlo retirement simulation for what is modeled and where the method falls short.

Historical backtest

The counterpart to Monte Carlo: instead of random returns, replay your plan against every actual rolling historical period (e.g., every 30-year window from 1928 onward). It doesn’t assume the future will look like the past, but it tests your plan against real sequences including 1929, 1966, and 2000. See historical backtesting for retirement.

Safe withdrawal rate (SWR)

The highest withdrawal rate that historically would have survived a given retirement horizon with high probability. The 4% rule is the most famous SWR estimate; modern research suggests 3.3%–4.5% depending on horizon, asset allocation, and starting valuations.

FIRE (Financial Independence, Retire Early)

A movement and framework targeting financial independence well before traditional retirement age. The classic FIRE target is 25× annual expenses (the inverse of the 4% rule). Variants include Lean FIRE (lower spend), Fat FIRE (higher spend), and Barista FIRE (partial work coverage of expenses).

Coast FIRE

A milder version of FIRE: reach a portfolio large enough that, even with no further contributions, it will grow to fund a traditional-age retirement. Once you reach it, your earnings only need to cover current spending.

Asset location

The strategy of placing different asset classes in different account types to minimize lifetime tax. Generally: bonds and high-yield assets in tax-deferred (RRSP/401k), tax-efficient stocks in taxable, highest-growth in tax-free (TFSA/Roth). See asset location across TFSA, RRSP, and non-reg.

Asset allocation

The mix of stocks, bonds, cash, and other asset classes across your entire portfolio. It is the biggest driver of long-run returns and volatility, well ahead of security selection or market timing. Often expressed as “60/40” (stocks/bonds) or by age-based rules of thumb.

Pension splitting

Canadian rule allowing up to 50% of eligible pension income (including RRIF withdrawals after age 65) to be reported on a lower-income spouse’s return. One of the most useful retirement tax tools for couples with unequal incomes. See pension income splitting in Canada.

Spousal attribution rule

The three-year rule on spousal RRSPs: if your spouse withdraws within three calendar years of your most recent contribution, the withdrawal is attributed back to you and taxed in your hands. A common trap when starting an RRSP meltdown using spousal funds.

Bonus Concepts

These show up regularly in retirement planning but don’t fit neatly into the categories above.

Backdoor Roth

A workaround for high-income US taxpayers who can’t contribute directly to a Roth IRA: contribute non-deductibly to a Traditional IRA, then convert to Roth. Triggers the pro-rata rule if you hold pre-tax IRA money elsewhere. Full mechanics in backdoor Roth and the pro-rata rule.

401(k) rollover

Moving an old 401(k) into an IRA when you change jobs or retire. Generally preferred for the wider investment menu and lower fees, but the rollover can interact badly with backdoor Roth strategies. See 401(k) rollover to IRA rules.

SBLOC (Securities-Backed Line of Credit)

A revolving credit line collateralized by a taxable brokerage account. Useful for short-term cash needs without realizing capital gains. Risks: margin calls in market downturns. See portfolio line of credit (SBLOC).

Withdrawal order

The sequence in which you draw from different account types in retirement. The conventional order (taxable → tax-deferred → tax-free) is often suboptimal; bracket-filling and conversion strategies usually beat it. Full analysis in retirement withdrawal order strategy.

Savings splitting (couples)

The strategy of allocating contributions between two spouses’ accounts to minimize lifetime household tax. Especially impactful when one spouse will retire earlier or earn substantially less. See savings splitting for couples.

Best state to retire (US)

State income tax treatment of retirement income varies enormously — from zero-tax states (Florida, Texas, Tennessee) to states that fully tax Social Security and pensions. See best states to retire (taxes).

Home equity / HELOC in retirement

Using home equity as a contingency or income source — through a HELOC, reverse mortgage, or downsizing. See home equity and HELOC in retirement and the buy-vs-rent question in buy vs rent in retirement.

Rental property as retirement income

Using rental real estate to generate inflation-resistant cash flow in retirement. Tax treatment differs significantly from financial assets. See rental property retirement income.

Retirement planning checklist: a year-by-year checklist for the five years before and after retirement
Retirement planning by age: what to focus on at 30, 40, 50, 60, and beyond
TFSA vs RRSP: which to fund first
Traditional IRA vs Roth IRA: same question, US edition
RRSP meltdown strategy: drawdown deep-dive
Roth conversion strategy: US drawdown deep-dive

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May 27, 2026 · 14 min read