Overview
The Registered Retirement Savings Plan (RRSP) is a tax-advantaged investment account designed to help Canadians save for retirement. Contributions to an RRSP are tax-deductible, and investment growth within the account is tax-sheltered until withdrawal.
Key Features
Contribution Limits
- Annual Limit: 18% of your previous year’s earned income, up to a maximum of $31,560 for 2025
- Contribution Room: Unused contribution room carries forward indefinitely
- Deadline: Contributions for the 2024 tax year must be made by March 3, 2025
Tax Benefits
- Immediate Tax Deduction: Contributions reduce your taxable income
- Tax-Deferred Growth: Investments grow tax-free inside your RRSP
- Tax-Efficient Retirement Income: Withdrawals are taxed at your marginal rate during retirement (typically lower than during working years)
Eligible Investments
- Stocks (Canadian and foreign)
- Bonds and GICs
- Mutual funds and ETFs
- Cash and money market securities
- Certain alternative investments
RRSP Strategies
First-Time Home Buyer’s Plan (HBP)
- Withdraw up to $35,000 tax-free for a first home purchase
- Must be repaid over 15 years
- No repayment required in the first year after withdrawal
Lifelong Learning Plan (LLP)
- Withdraw up to $10,000 per year (maximum $20,000 total) for education
- Must be repaid over 10 years
- Minimum repayment of 10% per year
Spousal RRSP
- Allows higher-earning spouse to contribute to lower-earning spouse’s RRSP
- Helps balance retirement income and reduce overall family tax burden
- Attribution rules apply to withdrawals within three years of contribution
RRSP vs. Other Accounts
- TFSA: Tax-free growth and withdrawals, but no upfront tax deduction
- Non-Registered: No tax advantages, but no contribution limits or withdrawal restrictions
- RESP: Specific to education savings with government grants
- RDSP: Specific to disability savings with government grants
Withdrawals and Retirement
For comprehensive strategies on RRSP withdrawals, see our complete guide to RRSP withdrawal strategies.
Regular Withdrawals
- Fully taxable as income
- Withholding tax rates:
- 10% (5% in Quebec) on amounts up to $5,000
- 20% (10% in Quebec) on amounts between $5,001 and $15,000
- 30% (15% in Quebec) on amounts over $15,000
Conversion Options
- Must convert RRSP to retirement income option by December 31 of the year you turn 71
- Options include:
- Registered Retirement Income Fund (RRIF)
- Annuity
- Lump-sum withdrawal (not recommended due to taxation)
Minimum RRIF Withdrawals
| Age | Withdrawal Rate |
|---|---|
| 71-72 | 5.40% |
| 73-74 | 5.53% |
| 75-77 | 5.67% |
| 78-79 | 5.82% |
| 80+ | Gradually increasing |
Common Questions
Should I maximize my RRSP or TFSA first?
Generally, contribute to RRSP if you expect to be in a lower tax bracket in retirement, and TFSA if you expect to be in a higher bracket.
Can I hold foreign investments in my RRSP?
Yes, but be aware of foreign withholding taxes which may not be recoverable within an RRSP.
What happens to my RRSP when I die?
- Tax-free transfer to a spouse’s RRSP/RRIF
- Fully taxable if transferred to non-spouse beneficiaries
- Potential to designate qualified beneficiaries to spread tax burden