Common RRSP mistakes and how to fix them

Updated November 2026

Most RRSP problems come from a handful of avoidable mistakes. Some cost a little each month; others cost thousands in tax or lost growth. Here are the common ones, what they cost, and how to put them right.

1. Over-contributing

The problem. You put in more than your deduction limit plus the $2,000 cushion, often because of an out-of-date notice of assessment, a forgotten group RRSP payroll deduction, or contributions at two institutions. The excess is taxed at 1% per month.

The fix. Withdraw the excess as soon as you notice (ask your issuer about the correct form so tax is not over-withheld), and file Form T1-OVP and pay any tax owing within 90 days after the end of the year. Check your room on CRA My Account before any large contribution. Details: Contribution limits.

2. Withdrawing early

The problem. A regular RRSP withdrawal is added to your income and taxed, and the contribution room you used is gone for good. The bank also withholds tax at source:

Amount withdrawn	Withholding outside Quebec	Withholding in Quebec (federal + provincial)
Up to $5,000	10%	19% (5% + 14%)
$5,000.01 to $15,000	20%	24% (10% + 14%)
Over $15,000	30%	29% (15% + 14%)

Withholding is only a prepayment. Example: you withdraw $10,000 in Ontario and $2,000 (20%) is withheld. If your marginal rate is 30%, the real tax is about $3,000, so you owe another $1,000 when you file. Splitting a withdrawal into smaller pieces lowers the withholding, not the final tax.

The fix. Keep an emergency fund in a TFSA or savings account so you are not forced to raid the RRSP. If you must withdraw, consider doing it in a low-income year, and set aside extra for tax. For a first home or education, use the Home Buyers’ Plan or Lifelong Learning Plan instead.

3. Missing Home Buyers’ Plan repayments

The problem. Any required yearly HBP or LLP repayment you skip is added to your income as RRSP income and taxed, and that room is lost.

The fix. Check the minimum repayment on your notice of assessment or in My Account. Contribute at least that amount by the deadline (contributions in the first 60 days of the next year count) and designate it as a repayment on Schedule 7. A contribution that is not designated is treated as an ordinary contribution, and the repayment counts as missed.

4. No beneficiary named

The problem. If nobody is named, the RRSP may be paid to your estate. That can mean delays and, in some provinces, probate fees, and it can make it harder to use the special rules that let a surviving spouse or common-law partner (or, in some cases, a financially dependent child or grandchild) transfer the money to their own registered plan.

The fix. Name a beneficiary with your plan issuer, or in your will where your province requires it (rules differ in Quebec), and update it after marriage, separation or a death in the family. See Estate planning.

5. Leaving money in cash

The problem. Contributions made in a rush before the deadline often land in a cash account and stay there for years, earning little.

The fix. Contributing and investing are two separate steps. After each contribution, make sure the money is invested according to a plan that suits your timeline. See Investing.

6. Paying high fees

The problem. A fund charging 2% a year instead of 0.5% can cost a large share of your final savings over a long period, because fees come off every year whatever the fund earns.

Example. $100,000 earning 6% a year before fees, left for 25 years:

With a 0.5% yearly fee (5.5% net): about $381,000.
With a 2% yearly fee (4% net): about $267,000.

The higher fee costs about $114,000, close to a third of the result.

The fix. Look up the management expense ratio (MER) of each fund you own, compare with lower-cost index funds or ETFs, and ask what you are paying for advice. See Mutual funds & ETFs.

7. Forgetting to deduct

The problem. You contribute but never claim the deduction, or lose the receipt. You have paid in with after-tax money and will still be taxed on withdrawal.

The fix. Unused contributions carry forward. Report them on Schedule 7 and claim them in the current or a later year. If you missed a deduction you meant to claim, you can ask the CRA to adjust a past return. Deferring on purpose can be smart if you expect a higher income soon.

8. Tripping the spousal attribution rule

The problem. Your spouse withdraws from a spousal RRSP while you have contributed to any spousal plan in that year or the two previous calendar years. The withdrawal is taxed to you, usually at a higher rate.

The fix. Stop spousal contributions three calendar years before planned withdrawals. Your spouse reports the amount using Form T2205. Details: Spousal RRSPs.

9. Converting late, or in a rush

The problem. Your RRSP must mature by December 31 of the year you turn 71: take the cash (fully taxable that year), move it to a RRIF, or buy an annuity. Leaving it to the last weeks of December risks a rushed or wrong choice.

The fix. Arrange the conversion months ahead. If you still have room, make your final contribution before December 31 of that year; after that you can contribute only to a spousal RRSP for a younger partner. See RRSP to RRIF at 71.

10. Holding investments that do not qualify

The problem. An RRSP may hold only qualified investments. Some private company shares, unlisted investments and certain arrangements can be non-qualified or prohibited, which can lead to special taxes. Promoters sometimes pitch schemes to “cash out” or “strip” RRSP money early with little tax; these can be scams or abusive tax schemes.

The fix. Stick to mainstream investments held through a regulated institution, ask your issuer before buying anything unusual, and read Investment scams. If you suspect a problem, speak with a tax professional quickly.