RRSPs explained: how a registered retirement savings plan works

Updated November 2026

A registered retirement savings plan (RRSP) is an account registered with the Canada Revenue Agency (CRA) that lets you deduct what you put in from your taxable income now and pay the tax later, when you take the money out, usually in retirement.

RRSPs in five points

1. A tax deduction now. Contributions you deduct lower your taxable income for the year. If you put in $5,000 and your marginal tax rate is 30%, your tax bill falls by about $1,500.
2. Tax-sheltered growth. Interest, dividends and capital gains earned inside the plan are not taxed while they stay there, so the whole amount keeps compounding.
3. Tax on the way out. Money you withdraw is added to your income and taxed in that year. The plan defers tax; it does not remove it.
4. Room comes from earned income. Each year you get new room equal to 18% of the previous year’s earned income, up to a dollar limit ($33,810 for 2026), minus any pension adjustment. Unused room carries forward.
5. Convert by 71. By December 31 of the year you turn 71 you must close the RRSP by taking the cash, moving it to a registered retirement income fund (RRIF) or buying an annuity.

• $33,8102026 RRSP dollar limit
• 18%of last year’s earned income
• March 1, 2027deadline for the 2026 tax year
• 71age by which the plan must mature

Who an RRSP suits

An RRSP works best when your tax rate is higher now than it will be when you withdraw. That is often true for people who:

• earn a middle or higher income from a job or self-employment, so the deduction saves tax at a good rate;
• expect a lower income in retirement than in their working years;
• can leave the money alone for a long time and will not need it for emergencies;
• have an employer that matches contributions to a group RRSP;
• are buying a first home or going back to school and can use the Home Buyers’ Plan or Lifelong Learning Plan.

It suits people less well if their income is low now, if they expect a higher income later, or if they will rely on income-tested benefits in retirement. For many of them a TFSA is the better first step. Our guide RRSP, TFSA or FHSA? walks through the choice.

Guides in this section

• How an RRSP saves taxHow an RRSP deduction produces a refund at your marginal rate, why tax-deferred growth helps, how withdrawals are taxed, and when a TFSA is the better choice.
• Contribution limitsHow much you can put in an RRSP for 2026 ($33,810 maximum), how your room is calculated, where to find it, and the March 1, 2027 deadline.
• RRSP, TFSA or FHSA?A plain decision guide to choosing between an RRSP, TFSA, FHSA and RESP by situation: first home, low or high income, workplace matching, and saving for children.
• Spousal RRSPsHow a spousal RRSP works, who gets the deduction, the three-year attribution rule, contributing after 71, and how pension income splitting changed its role.
• Group RRSPsHow a workplace group RRSP works: payroll deductions, less tax taken from each pay, employer matching, fees and fund choice, DPSP vesting, and options when you leave.
• Home Buyers’ PlanHow first-time buyers can take up to $60,000 from an RRSP under the Home Buyers’ Plan, repayment rules and relief, the 90-day rule, and the Lifelong Learning Plan.
• Foreign investmentsThe old 30% foreign-content limit is long gone. How US dividend withholding works in an RRSP, US-listed vs Canadian-listed ETFs, currency risk, and diversifying abroad.
• RRSP loans and leverageHow an RRSP loan works, when it can make sense, why interest on it is not deductible, and how borrowing to invest magnifies both gains and losses, with worked examples.
• Common mistakesTen common RRSP mistakes, from over-contributing and early withdrawals to missed HBP repayments, idle cash and high fees, with what each one costs and how to fix it.
• RRSP quizTwelve quick questions on RRSP limits, deadlines, withdrawals, the Home Buyers’ Plan, spousal plans and foreign investing, with answers and links to full guides.

Sources

• Registered Retirement Savings Plan (RRSP), Canada Revenue Agency
• MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE, Canada Revenue Agency
• How contributions affect your RRSP deduction limit, Canada Revenue Agency
• Important dates for RRSPs, HBP, LLP, FHSAs and more, Canada Revenue Agency
• Options for your own RRSPs, Canada Revenue Agency