Registered Retirement Savings Plan (RRSP)

Want to put off paying tax and increase your retirement savings faster? Register your investments in a Registered Retirement Savings Plan (RRSP) and watch your money grow.

An RRSP is right for you if you're 71 or younger, you earn taxable income, and you want to save for your retirement.

Advantages

  • Get money back or tax savings when you make RRSP contributions
  • Investment income isn't taxed as long as it stays in your RRSP, so your savings will grow faster in an RRSP than if they weren’t registered
  • Under certain conditions, your RRSP is protected from creditors in the event of personal bankruptcy*
  • If you qualify, you can use up to $25,000 from your RRSP to buy or build a home under the Home Buyers' Plan (HBP) and up to $20,000 to pay for school under the Lifelong Learning Plan (LLP)
  • You can contribute to your spouse's RRSP

RRSP-eligible savings products

FAQ

How does an RRSP work?

You don't pay tax on the money you invest in your RRSP as long as it remains in the plan, and the interest you earn is tax-free too. You do, however, have to pay tax when you make a withdrawal.

Do RRSPs have to be converted into retirement income?

Since RRSPs are mainly intended to help you save for retirement, you have to convert your RRSP into retirement income before the end of the calendar year you turn 71.

How? Just transfer your investments into a Registered Retirement Income Fund (RRIF) or purchase a life annuity or a term certain annuity.

You can also make withdrawals, but you'll be fully taxed on any money you take out.

How much can I contribute?

You can find out how much RRSP contribution room you have by looking at your most recent Notice of Assessment. This information appears under the heading RRSP Deduction Limit Statement. The Canada Revenue Agency (CRA) sends this document to you each year after they process your tax return.

I didn't use up my contribution room this year. What will happen to it?

You can carry forward any unused contribution room from one year to the next until you've used it up or until the end of the year you turn 71, whichever comes first.

What happens if I take out of my RRSP?

You have to pay a withholding tax as soon as you take any money out of your RRSP.

Depending on what withholding tax rate is applied and what tax bracket you're in, the withholding tax may not fully cover the taxes owing. You also have to add the withdrawal to your other income for the year when you file your taxes.

RRSP withdrawals don't free up additional contribution room, so you won't be able to make it up later on.

Note: Withdrawals made under the HBP (Home Buyers' Plan) or the LLP (Lifelong Learning Plan) are not subject to these rules.

What happens if I overcontribute to my RRSP?

You can overcontribute by up to $2,000* without being penalized. As soon as you contribute more than this amount, you have to pay a penalty of 1% per month. This penalty will continue to be charged until you either withdraw the excess or until enough new contribution room is added. The 1% penalty is calculated on the total of all your overcontributions.

* If you're 18 or younger during any part of the year, you aren't entitled to this $2,000 buffer.

How will I know if I'm saving enough in my RRSP?

Experts calculate that you'll need 60-80% of your current gross income when you retire. This percentage depends on your lifestyle, your health, your income and your plans.

Even if you expect to receive benefits from the government or your employer, you'll probably need additional personal savings to maintain your standard of living. That's where RRSPs come in.

Your financial advisor can help you set realistic goals and design a plan so you can achieve them.

When can I start contributing to an RRSP?

You can start making contributions the year after you first have "earned income". Contribute early and often. Time is your friend when it comes to savings.

When do I have to stop contributing to my RRSP?

You can contribute to your RRSP until December 31 of the year you turn 71, at which point you'll have to convert it into retirement income.

I'm approaching the RRSP contribution age limit. What do I need to do?

You have until December 31 of the year you turn 71 to convert your RRSP into retirement income. You have three options:

  • Withdraw the money from your RRSP. This withdrawal will be taxed in full the year you take it out.
  • Convert your RRSP into a RRIF (Registered Retirement Income Fund) – a sort of RRSP extender. You won't be taxed on the money that stays in your RRIF, but you have to take out a minimum amount every year.
  • Purchase a life annuity (for a steady income stream for life) or a term certain annuity (payable to age 90).

I want to contribute to my RRSP but I can't afford to right now. What can I do?

Why not take out an RRSP loan? Talk to your financial advisor to see if this is the right strategy for you.

If you'd prefer not to take out a loan, think about automatic deductions. This approach lets you save as much as you can afford without having to scramble to come up with a large contribution at the end of the year.

What is a spousal RRSP?

With a spousal RRSP, you use some or all of your own contribution room to contribute to your spouse's plan. The money will grow in your spouse's name, but you'll receive the tax deduction.

This type of contribution can offer tax advantages for couples if, for example, one of the spouses is older or in a higher tax bracket. Your advisor will look at your situation to help you decide whether this approach is right for you. If it is, they'll help you set it up.

What's the difference between an RRSP and TFSA?

An RRSP helps you save for your retirement, whereas a Tax-Free Savings Account (TFSA) helps you save for whatever you want, whenever you want (including retirement).

From a tax perspective, the main difference between the two plans is when they're taxed:

  • With an RRSP, you'll get an immediate tax savings or a refund when you file, but you'll pay tax on the money you take out
  • The money you put into a TFSA isn't tax-deductible, but withdrawals are tax-free

Check out our RRSP vs. TFSA table for an overview of the main differences between the two plans.

What's the Home Buyers' Plan (HBP)?

The Home Buyers' Plan (HBP) lets you make temporary tax-free withdrawals from your RRSP, up to $25,000, to buy or build a home.

To find out more, contact the Canada Revenue Agency (CRA) or visit their website

What's the lifelong Learning Plan (LLP)?

The Lifelong Learning Plan (LLP) lets you make temporary tax-free withdrawals from your RRSP, $10,000 per calendar year, up to a maximum of $20,000, to pay for school for you or your spouse.

To find out more, contact the Canada Revenue Agency (CRA).

When's the deadline for RRSP contributions?

As a general rule, contributions made after March 1 are deducted from taxable income for that year or for subsequent years, whereas contributions paid during the first 60 days of the year can be applied to the previous year, the current year, or subsequent years.

 * Exemption from seizure rules can be complex. If you're concerned, you should consult a legal advisor (lawyer or notary) for an assessment of your situation.