RRSP (Registered Retirement Savings Plans)

What Is an RRSP?

A Registered Retirement Savings Plan (RRSP) is a government-registered account designed to help Canadians save for retirement. Contributions are tax-deductible, and investments inside the RRSP grow tax-deferred until you withdraw the money, ideally in retirement when your income (and tax rate) is lower.

Key Features

• Tax-Deductible Contributions: Contributions reduce your taxable income for the year, often leading to a tax refund.
• Tax-Deferred Growth: Investments inside your RRSP (stocks, ETFs, GICs, mutual funds, etc.) grow without tax until withdrawal.
• Taxed on Withdrawal: When you take money out, it's taxed as regular income.
• Contribution Room: Unused room carries forward indefinitely.
  

2025 RRSP Contribution Limits

• Annual limit: 18% of your previous year’s earned income, up to $31,560 for 2025.
• You can find your exact limit on your CRA My Account.
• Contributions must be made within 60 days after the end of the calendar year to count for that tax year.
  

What Can You Hold in an RRSP?

You can hold a wide range of investments, including:

• Stocks and ETFs
• Mutual funds
• GICs and bonds
• Cash

Choose based on your time horizon, risk tolerance, and investment strategy.

RRSP Withdrawal Rules

• Withdrawals are taxed as income in the year you take them out.
• Early withdrawals (before retirement) may trigger withholding tax.
• Funds can be accessed penalty-free under:
  
  • Home Buyers’ Plan (HBP): Withdraw up to $35,000 to buy your first home
  • Lifelong Learning Plan (LLP): Withdraw up to $10,000/year for education
    

When Should You Use an RRSP?

An RRSP makes the most sense if you:

• Expect to be in a lower tax bracket in retirement
• Want to reduce your taxes today
• Are saving for a long-term goal like retirement
• Plan to buy your first home or go back to school using the HBP or LLP
  

Key Takeaways

• An RRSP helps you save for retirement while reducing taxes now
• Contributions grow tax-deferred, and unused room carries forward
• Withdrawals are taxed, so it’s best to use funds in retirement or through specific programs