Registered Retirement Savings Plan (RRSP)
A registered account that reduces your taxable income today, defers tax on growth, and taxes withdrawals as income later, generally in retirement, when your tax rate may be lower.
What it is
A Registered Retirement Savings Plan (RRSP) is a registered account designed to encourage retirement savings by giving a tax deduction for contributions. Like a TFSA, it’s a tax-advantaged wrapper that can hold a range of qualified investments, not a single product. The core trade is a deduction now in exchange for taxable income later: contributions reduce your taxable income in the year they’re claimed (or a future year, since you can carry forward a deduction), investment growth is tax-deferred while it stays in the plan, and withdrawals are taxed as ordinary income when they’re taken out.
Eligibility, contributions & withdrawals
Your personal RRSP contribution room is 18% of your previous year’s earned income, up to an annual dollar maximum, $33,810 for the 2026 tax year, reduced by any pension adjustment from an employer plan, and increased by any unused room carried forward from previous years. There is no single number that applies to everyone; your actual limit appears on your Notice of Assessment or in CRA My Account. Contributions can generally be made until the end of the year you turn 71, after which the RRSP must be converted, typically to a Registered Retirement Income Fund (RRIF) or an annuity. A buffer of up to $2,000 in over-contributions is allowed without penalty, though it isn’t deductible; larger excess amounts are subject to a 1% monthly penalty tax.
Figures current as of October 2026. Confirm your personal contribution room in CRA My Account before contributing.
Tax treatment
Contributions are deducted from your taxable income in the year claimed, which can reduce the tax you owe or increase a refund. Investment growth inside the RRSP is not taxed while it remains in the plan. Withdrawals, including from a RRIF after conversion, are fully taxed as ordinary income in the year received, at whatever your marginal tax rate is at that time.
Benefits, risks, and common misunderstandings
Contributions reduce your taxable income in the year claimed, which can be especially valuable in a high-income year.
Every dollar withdrawn is taxed as income later. An RRSP defers tax; it doesn’t eliminate it, and withdrawing in a high-income year can be costly.
Investment growth compounds tax-deferred for potentially decades before withdrawal.
Mandatory conversion and minimum withdrawals apply after the RRIF stage begins, which can force taxable income in years you might not want it.
Can be especially effective when your marginal tax rate in retirement is expected to be lower than during your working years.
If your retirement income ends up similar to or higher than your working income, the deferral advantage shrinks or can even work against you.
A common misunderstanding corrected: RRSP withdrawals are not tax-free like a TFSA.
Every withdrawal is added to your taxable income for that year and taxed at your marginal rate, with tax typically withheld at source.
See the TFSA page for the full TFSA vs. RRSP comparison table.
For business owners
Business owners who pay themselves through a mix of salary and dividends should note: RRSP contribution room is generated by “earned income,” which includes salary but not dividend income. An owner who draws only dividends from their corporation may have little or no RRSP room, a common surprise, and one more reason personal and corporate compensation planning are connected decisions, not separate ones.
Frequently asked questions
Does dividend income from my corporation create RRSP room?
What happens to my RRSP at age 71?
Can I contribute to a spouse’s RRSP?
Is there a First-Time Home Buyers’ Plan?
How does this compare to a TFSA?
Wondering how your RRSP room interacts with how you pay yourself from the business? Book a strategy consultation →