You earn a good salary and pay a fair amount of tax every year.
Why it fits: RRSP contributions give you a deduction at your current higher tax rate, and you will likely withdraw in retirement at a lower rate.
Registered Retirement Savings Plan (RRSP)
Save for retirement and lower your taxes today.
An RRSP is a government-registered savings plan that helps you build retirement income. Your contributions are tax-deductible, and your savings grow tax-deferred until you take money out, usually in retirement when your tax rate may be lower.
Overview
A Registered Retirement Savings Plan, or RRSP, is one of the most popular ways Canadians save for retirement. It gives you a tax deduction today and lets your savings grow tax-deferred until you need them.
The idea is simple: you put money aside while you are working and in a higher tax bracket, then take it out in retirement, when your income and tax rate are often lower.
How much room do you have?
Each year, you earn new RRSP room equal to 18% of your previous year’s earned income, up to the annual limit set by the CRA. Any room you do not use carries forward forever. Since the dollar limit changes every year, the easiest way to see your exact room is in CRA My Account or on your latest Notice of Assessment.
Choosing what goes inside your RRSP
An RRSP is a container, not an investment. With us, you can fill it with insurance-based options:
- Segregated funds: market growth potential with guarantees on your principal at maturity or death.
- GICs and guaranteed interest accounts: predictable, guaranteed returns with no market risk.
- Annuities: when you are ready, turn your RRSP into guaranteed retirement income.
We help you choose the right mix for your goals, your timeline and your comfort with risk.
How it works
- 1
Check your contribution room
You can contribute 18% of last year's earned income, up to the annual limit set by the CRA. Unused room carries forward. Your exact room is shown on your Notice of Assessment and in CRA My Account.
- 2
Contribute and claim your deduction
Every dollar you contribute can be deducted from your taxable income, which can lower your taxes or increase your refund.
- 3
Grow your savings tax-deferred
Inside your RRSP, you can hold segregated funds, GICs or other insurance-based investments. You pay no tax on growth while it stays in the plan.
- 4
Turn savings into retirement income
By the end of the year you turn 71, you must convert your RRSP to a RRIF or buy an annuity. You then pay tax on the income as you receive it.
Key benefits
Immediate tax savings
Your contributions reduce your taxable income, so the higher your tax bracket, the bigger your savings.
Tax-deferred growth
Interest, dividends and gains are not taxed while they stay inside your RRSP, so your money can compound faster.
Unused room carries forward
If you cannot contribute the maximum this year, the unused room is saved for future years with no time limit.
Spousal RRSP option
Contributing to a spousal RRSP lets you claim the deduction while building savings in your spouse's name, which can help split income in retirement.
Home Buyers' Plan
First-time home buyers can withdraw up to $60,000 tax-free for a down payment and repay it to the RRSP over time.
Lifelong Learning Plan
You can borrow from your RRSP to pay for full-time training or education for you or your spouse, then repay it over several years.
Who it’s for
You are saving for your first home and want to make the most of every dollar.
Why it fits: You get a tax deduction now, and the Home Buyers' Plan lets you use up to $60,000 of your RRSP for your down payment.
One spouse earns much more than the other and you both want a comfortable retirement.
Why it fits: A spousal RRSP lets the higher earner take the deduction while building savings in the lower earner's name, so retirement income is taxed more evenly.
Pros & cons
Pros
- Contributions lower your taxable income
- Tax-deferred growth for decades
- Unused room never expires
- Flexible programs for home buying and education
Things to consider
- Withdrawals are fully taxable as income
- Withdrawn room is lost, except under the Home Buyers' Plan and Lifelong Learning Plan
- Must be converted to a RRIF or annuity by the end of the year you turn 71
How it compares
| RRSP compared with a TFSA and a non-registered account | RRSP | TFSA | Non-registered |
|---|---|---|---|
| Tax deduction for contributions | Yes | No | No |
| Tax on growth | Deferred until withdrawal | None | Taxed each year or when sold |
| Tax on withdrawals | Fully taxable as income | Tax-free | Only on gains or income |
| Contribution limit | 18% of earned income up to the annual limit | Annual limit set by the CRA | No limit |
| Withdrawn room restored | No (except HBP and LLP) | Yes the next calendar year | Not applicable |
| Best for | Higher earners saving for retirement | Flexible savings and lower earners | Savings after registered room is used |
Run the numbers
RRSP, TFSA & RESP growthProject your registered savings, tax refunds and government education grants.Frequently asked questions
How much can I contribute to my RRSP?
Your limit is 18% of last year's earned income, up to the annual maximum set by the CRA, plus any unused room from past years. Check your Notice of Assessment or CRA My Account for your exact number.
What happens if I over-contribute?
You have a $2,000 lifetime buffer. Over-contributions above that are charged a penalty of 1% per month until they are removed, so it is best to check your room before you contribute.
Is a spousal RRSP right for me?
It can make sense if one spouse will have a much higher income in retirement. Money withdrawn by the spouse is generally taxed in their hands, as long as no contributions were made in the year of withdrawal or the two previous years.
Can I hold insurance products in my RRSP?
Yes. Segregated funds, GICs and annuities can all be held in an RRSP. Segregated funds add maturity and death benefit guarantees, and can help your savings pass directly to a beneficiary.
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