Similar to the United State's 401(k) and Individual Retirement Accounts, rules regulating RSP and RIF accounts govern contribution of funds, withdrawal of funds, and the prohibition of tax avoidance. RSP and RIFs are regulated by the Canadian Revenue Agency, according to Investopedia.
RSP and RIFs do not require self management, explains the CRA. The expertise of a financial adviser can be enlisted to navigate the complexities of choosing qualified investments and adhering to the regulations of RSP and RIFs. The Canadian Revenue Agency imposes limits on the amount of funds contributed to the account that are income tax deductible, according to its website. Contribution limits are based on the investor's income, and investors receive notification of personal contribution limits via his notice of assessment. Withdrawals are also regulated, and any withdrawals made before the investor reaches retirement age are subject to large amounts of withholding taxes, unless funds are utilized to pay education expenses or to purchase a home.
The Canadian Revenue Agency further regulates RSP and RIF accounts by requiring that RSPs be converted into RIFs no later than the last day of the investors 71st birthday. RIFs are extensions of RSPs in that withdrawals are permitted from both accounts, and both contain the same qualifying investments, although contributions can be made to RSPs only. While there are no limits imposed on the amount of funds that can be withdrawn from an RIF account, there are mandatory minimum withdrawals determined by the investor's age and net worth, and they are subject to income taxes.
In addition to minimum withdrawals, the Canadian Revenue Agency has also instituted anti-avoidance rules. These rules help prevent aggressive tax planning by imposing taxes on prohibited and non-qualified investments, such as debts belonging to the investor, according to the Canadian Revenue Agency's website.