Registered Retirement Savings Plan

An RRSP is a retirement savings plan that you set up and that you, your spouse or your common-law partner contribute to. Income earned inside the RRSP is usually not taxed while it stays in the plan; you generally pay tax when you take money out. You open an RRSP through a financial institution such as a bank, credit union, trust or insurance company. We can explain the types of RRSP and the investments they can hold.

Reviewed by Swinder Singh, Licensed Life Insurance and Accident & Sickness Insurance Advisor in Ontario (FSRA licence #08105406), SSJ Financial. Last content review: October 11, 2026.

Benefits of Opening an RRSP

• Contributions are tax-deductible
• Savings grow tax-deferred
• You can convert your RRSP to receive regular payments when you retire
• Contributing to a spousal RRSP can help reduce your taxes
• You can withdraw up to $60,000 toward a down payment on your first home under the Home Buyers’ Plan (HBP)
• You can also take out up to $20,000 to pay for education costs for you or your spouse under the Lifelong Learning Plan (LLP)

How an RRSP Lowers Your Tax

Here is how a tax-deferred account like an RRSP works. Say you earn $70,000 a year and put the maximum allowed, $12,600, into your RRSP. At tax time, the CRA treats you as though you earned $57,400.

Tax-deferred does not mean tax-free. You pay tax when you withdraw the money years later, but by then you will be retired, your income will almost certainly be smaller and your tax rate will be lower than it is now.

RRSP Contribution Limit

RRSPs are registered accounts, so they come with rules. One of the most important is how much you can contribute in a year: 18% of your previous year’s income or the annual maximum, whichever is smaller. The maximum changes each year, and you can find this year’s and last year’s contribution limit on the CRA website. Unused contribution room carries forward, so you can catch up if you did not contribute the maximum in earlier years. The Notice of Assessment you received after filing last year’s taxes shows how much you can contribute.

RRSP FAQs

How much can I contribute to an RRSP?

Up to 18% of your previous year’s earned income or the annual maximum set by the CRA, whichever is smaller, plus any unused room carried forward from earlier years. Your Notice of Assessment shows your limit.

Are RRSP contributions tax-deductible?

Yes. Contributions reduce your taxable income for the year. You pay tax later, when you take the money out.

Can I use my RRSP to buy my first home?

Yes. Under the Home Buyers’ Plan (HBP) you can withdraw up to $60,000 from your RRSP toward a down payment on your first home.

What happens to my RRSP when I retire?

You can convert it to receive regular payments in retirement. Withdrawals are taxed as income, often at a lower rate than during your working years.