RRSP Basics — The ABCs of RRSPs

What is an RRSP?

Your Registered Retirement Savings Plan (RRSP) is registered by the Government of Canada and designed to help you save for retirement. You can contribute funds to an RRSP for yourself, and you can also contribute to an RRSP for your spouse or common-law partner. Your contributions to an RRSP are tax deductible. You can increase your financial well-being and reduce your annual tax payment by contributing to an RRSP.

You can use the contributions to purchase investments, and the gains and income generated from those investments are not taxed as long as the funds remain in the plan. However, withdrawals from your RRSP are treated as taxable income.

What is a self-directed RRSP?

With a self-directed RRSP, you have the freedom to oversee the investments in your RRSP. You can make all the decisions about which investments to buy, sell and manage your account at your own convenience.

What types of investments can I hold in an RRSP?

You can hold a wide range of investments within an RRSP, including stocks, ETFs, mutual funds, bonds, GICs, and cash.

How much can I contribute to my RRSP?

There are limits to how much you can contribute each year to your RRSP or to your spouse’s RRSP. Your allowable contribution to your RRSP is the lowest of the following:

• 18% of the earned income reported on your tax return for the previous year
• The maximum annual contribution limit for the year, which is set by the government
• The remaining limit after any employer-sponsored pension plan contribution

Additionally, since 1991 you can also carry forward unused contribution room to use in future years if you are unable to maximize your contribution in any given year.

To find out the exact amount you can contribute this year, as well as your carry-forward contribution room, check your most recent Notice of Assessment from Canada Revenue Agency (CRA) or login to your online account with CRA.

Deadline to contribute to an RRSP

To be eligible for an RRSP deduction in a specific taxation year, you can make contributions anytime during that year, or generally up to 60 days into the following year. The RRSP contribution deadline for 2024 is March 3, 2025.

Age limitation to contributing to an RRSP

You can contribute to your RRSP until the end of the year in which you turn 71. After that, you must withdraw the assets, convert them into a registered retirement income fund (RRIF), or purchase an annuity.

Ideal age to begin contributing to an RRSP

There is no minimum contribution age, but you must have earned income reported to CRA. To take advantage of the power of compounding interest, start your RRSP contributions as soon as possible.

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