If you’re not exactly sure what a registered retirement savings plan is, you’re not alone.

“Even though RRSPs have been around since 1957, there’s still some confusion surrounding them,” says Paul Lermitte, a Vancouver-based certified financial planner with Assante Wealth Management. Here, Lermitte answers the following common RRSP questions:

Why should I contribute to an RRSP? One important reason is that RRSPs will help you save for retirement. An added benefit is that if you are in a mid-range to high tax bracket, contributing annually to an RRSP will give you a tax break each year.

“If you’re in a lower tax bracket-say, anything below $35,000 annual gross – you might be better off putting your money in a tax-free savings account,” says Lermitte.

Can I use my RRSPs to buy a house? Yes – but you have to be considered a first-time homebuyer. If you meet those requirements, under a federal government program called the Home Buyers’ Plan, you can withdraw up to $25,000 from your RRSPs in one calendar year to help finance a house purchase. “Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years until the balance is zero,” says Lermitte.

What’s the best type of RRSP fund? “Don’t go for 100 per cent bonds or 100 per cent equities,” says Lermitte. “The volatility will be too harsh.” If you are working with a certified financial planner, ask them to put your money in what’s called a “balanced fund.”

With the downturn in global markets, are RRSPs a wise investment? “They are absolutely still a smart investment option,” says Lermitte. “When the markets are volatile, it’s important to stay the course.”

Try to contribute to an RRSP every year – and to push yourself to funnel more money into it each year than you did the previous year.