Contributions to a Registered Retirement Savings Plan can be deducted to reduce the taxes of an individual in the year that they are made.However, these contributions will be subject to tax when they are withdrawn from the plan.What type of tax planning is in- volved in this arrangement?

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The Answer is The basic type of tax planning that is involved in Registered Retirement Savings Plans is tax deferral-a tax savings results from making contributions that will have to be paid back at a later point in time.There may also be an element of avoidance in that, after retirement, an individual may be in a lower tax bracket than he was during his working years.If this is the case, there will be an absolute reduction in taxes.(This assumes that the basic rate structure is unchanged.)

Contributions to a Registered Retirement Savings Plan Can Be Deducted