Registered Retirement Savings Plan (RRSP) at a Glance
Whether you are just starting to think about retirement or already planning for it, a Registered Retirement Savings Plan (RRSP) is a smart, tax-efficient way to grow your savings. Contributions can reduce your income tax today, while your investments grow tax-deferred until you are ready to use them—helping you build financial security for the future.
Key Benefits
- Tax deduction now: You may deduct contributions from your taxable income in the year you make them or in a future year, potentially lowering your income taxes payable.
- Tax-deferred growth: Investments grow without being taxed annually; tax is deferred until withdrawal.
- Flexibility of investments: You can hold a wide range of investments inside your RRSP such as stocks, bonds, mutual funds, GICs, and ETFs.
- Income splitting and spousal RRSPs: You may contribute to a spousal RRSP for your spouse or common-law partner to balance future taxable income between two people.
Who can Open and Use an RRSP?
- Any Canadian resident with a valid Social Insurance Number, earned income, and a tax return can open and contribute to an RRSP.
- Non-residents of Canada can contribute if they have contribution room from earned income in Canada prior to leaving the country.
Withdrawals
- Funds can be withdrawn anytime; withdrawals are taxable income in the year received.
- Unlike a TFSA, contribution room is not restored after withdrawal.
- RRSPs must be closed by December 31 of the year you turn 71, typically by converting to a RRIF or annuity.
Contribution & Deduction Limits
- Annual contribution limit (2025): The RRSP contribution limit or room is 18% of your earned income from the previous year, up to a maximum of $32,490. The maximum amount is indexed to inflation and increases annually. For the most up-to-date information on your RRSP contribution room, check your CRA My Account.
- Carry-forward room: If you don’t use all your RRSP contribution room in a year, any unused amount will carry forward indefinitely and be added to your future contribution limit, up to December 31 of the year you turn 71.
- Pension adjustment: If you participate in an employer-sponsored pension plan (RPP, DPSP, etc.), your RRSP contribution room is reduced by the pension adjustment reported on your T4.
- Deadline for contributions: You can make RRSP contributions at any time in a calendar year and deduct the contributions in that year. Contributions made within the first 60 days of the next year can be deducted on the previous year’s return.
| RRSP vs TFSA - High-Level Comparison | ||
|---|---|---|
| Factor | RRSP |
TFSA |
| Contribution tax deduction | Yes | No |
| Withdrawals taxed | Yes | No* |
| Impact on income-related benefits | Withdrawals count as income and may affect benefits like OAS or GIS | Withdrawals do not count as income |
| Age to stop contributing | End of year you turn 71 | No age limit (as long as resident and eligible) |
| Best use case | 18% of prior year’s earned income (up to annual maximum); unused room carries forward indefinitely (until age 71) | $7,000 annual limit (2025); unused room carries forward indefinitely . Withdrawals are added back to your contribution room the following year. |
| Withdrawals | Reduces taxable income during high-income years; builds retirement savings | Offers more flexibility for short and medium term goals; complements RRSPs |
TFSA withdrawals are not taxed. RRSP withdrawals are taxed at source, even if the funds are immediately re-contributed to a TFSA.
Additional Considerations
- Over-contributions: There is a $2,000 lifetime buffer above your contribution room where no penalty applies. Any excess beyond that is subject to 1% per month penalty tax until corrected or withdrawn.
- Withholding tax & timing: RRSP withdrawals are subject to withholding tax and count as taxable income. Making large withdrawals during high-income years can push you into a higher marginal tax bracket.
- Non-residency: If you move outside of Canada, your RRSP remains in place, however withdrawals will be subject to a default 25% non-resident withholding tax. Tax treaties between Canada and your new country of residence may reduce the withholding tax to a lower rate. Please consult a tax professional for guidance specific to your situation.
For a clearer picture of the immediate benefits of an RRSP, check out our RRSP Tax Savings Calculator to estimate your tax deduction and after-tax value of contributions.
Securities-related products and services are offered through Raymond James Ltd. (RJL), regulated by the Canadian Investment Regulatory Organization (CIRO) and a Member of the Canadian Investor Protection Fund. RJL financial/investment advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not regulated by CIRO and is not a Member of the Canadian Investor Protection Fund. Solus Trust Company (“STC”) is an affiliate of Raymond James Ltd. and offers trust services across Canada. STC is not regulated by CIRO and is not a Member of the Canadian Investor Protection Fund.