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- Funds can be withdrawn anytime; withdrawals are taxable income in the year received.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.
| 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 | Reduces taxable income during high-income years; builds retirement savings | Offers more flexibility for short and medium term goals; complements RRSPs |
Additional Considerations
- Over-contributions: There is a $2,000 lifetime buffer above your contribution room where no penalty 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.
Enhance your comprehension:
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- Dual Citizenship in Canada
- Should You Roll Over a 401(k) to an IRA When Moving to Canada?
- Retiring From the United States to Nova Scotia, Canada
- How to Manage Your 401(k) When Moving to Canada
- U.S. Mutual Funds in Canada: Smart Strategies to Avoid Tax Traps
- Cross Border Financial Planning
- 5 Ways Financial Advisors Manage Volatility to Safeguard Your Investments at Raymond James
- Cross Border U.S. Inheritance in Canada: 10 Mistakes To Avoid
- IRA and RRSP Accounts
- What Happens to a U.S. Inheritance When You Move to Canada?
- Moving From the U.S. to Nova Scotia: Don’t Make These IRA Mistakes
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