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What is an RRSP?
A Registered Retirement Savings Plan (RRSP) is a government-registered investment account that lets Canadians save for retirement with two major tax advantages: contributions are tax-deductible (reducing your income this year), and all growth inside the account is tax-sheltered until you withdraw.
Think of it as the government's deal: invest now, pay tax later — and in the meantime, the money that would've gone to taxes stays invested and compounds for you.
You earn $80,000. You contribute $15,000 to your RRSP. Your taxable income drops to $65,000. The tax savings could be $4,000–$6,000 returned as a refund. Invest that refund in your TFSA and you've used the system to its full potential.
How Does an RRSP Work?
Every year, you earn new RRSP contribution room equal to 18% of your previous year's earned income, up to an annual maximum. Unused room carries forward indefinitely — so if you haven't been contributing, you may have decades of unused room available right now.
Your exact contribution room is shown on your CRA Notice of Assessment, or you can look it up on CRA My Account.
RRSP Contribution Limits 2026
| Year | Annual Maximum | % of Previous Year's Income |
|---|---|---|
| 2021 | $27,830 | 18% |
| 2022 | $29,210 | 18% |
| 2023 | $30,780 | 18% |
| 2024 | $31,560 | 18% |
| 2025 | $32,490 | 18% ✦ Current |
| 2026 | TBD (est. ~$33,800) | 18% |
✦ 2025 limit applies to 2026 contributions. 2026 limit depends on your 2025 earned income. Check your exact room on CRA My Account.
The RRSP Deadline — Why It Matters
You have until 60 days after December 31 (typically around March 1) to contribute to your RRSP and claim the deduction on your prior year's taxes. Miss this deadline and you lose the ability to claim it for that tax year.
To claim an RRSP deduction on your 2025 tax return, contributions must be made by March 2, 2026. After that date, any contributions go toward your 2026 return.
What Can You Hold in an RRSP?
Just like a TFSA, your RRSP at a brokerage like Wealthsimple can hold a wide range of investments:
- Stocks — Canadian and US equities
- ETFs — the most popular choice for long-term RRSP investors
- Bonds — lower-risk fixed income products
- GICs — guaranteed return products
- Mutual funds — actively managed options
One nuance: US dividends held in an RRSP are not subject to the 15% withholding tax that applies in a TFSA — this makes an RRSP particularly efficient for holding US dividend-paying stocks or ETFs.
RRSP Withdrawal Rules
You can withdraw from your RRSP at any time, but withdrawals are added to your taxable income in the year you take them. There's also a withholding tax applied at the time of withdrawal (10–30% depending on the amount), which acts as a prepayment toward your annual tax bill.
The RRSP must be converted to a RRIF (Registered Retirement Income Fund) by December 31 of the year you turn 71. After that, you receive minimum annual payments that are taxed as income — ideally at a lower rate than when you were working.
Two Special RRSP Withdrawal Programs
- Home Buyers' Plan (HBP): Withdraw up to $35,000 ($70,000 per couple) tax-free to buy your first home, then repay over 15 years. Note: if you're saving for a first home, the new FHSA is often better.
- Lifelong Learning Plan (LLP): Withdraw up to $10,000/year (max $20,000 total) to fund full-time education, repaid over 10 years.
✅ Advantages
- Contributions reduce taxable income now
- Tax-deferred growth until withdrawal
- No US dividend withholding tax
- Home Buyers' Plan and LLP access
- Unused room carries forward forever
- Spousal RRSP for income splitting
❌ Limitations
- Withdrawals taxed as income
- Must convert to RRIF at 71
- Withholding tax on withdrawals
- Over-contribution penalty (1%/month over $2K buffer)
- Less flexible than a TFSA
RRSP vs TFSA — Which Is Better?
The honest answer: it depends on your income. The RRSP wins when you're in a higher tax bracket now than you will be in retirement. The TFSA wins almost everywhere else.
- Income under $50K: Start with a TFSA first — the RRSP deduction isn't worth much at a low marginal rate.
- Income $50K–$100K: Both are valuable. Consider maxing your TFSA first, then RRSP.
- Income over $100K: RRSP becomes very powerful — you're deferring tax from a high rate today to a lower rate in retirement.
- First home buyers: Check the FHSA first — it combines RRSP and TFSA benefits for first-time buyers.
How to Open an RRSP in Canada
- Click the Wealthsimple link above (referral code NLX83A auto-applies)
- Select "RRSP" as your account type during signup
- Verify your identity with your SIN and government ID
- Connect your bank account and make your first deposit
- Choose your investments — a simple all-equity ETF like XEQT is a popular starting point
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