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A Registered Retirement Savings Plan is an account created for Canadians to save for retirement while saving on taxes before retirement.
Invest your hard-earned money, have it grow over time, defer your taxes and withdraw it as retirement income later.
Contributions can be used as deductions against your earned income, lowering the tax you pay and sometimes getting a tax refund you can invest into your RRSP or TFSA.
You can withdraw up to $35,000 to buy or build a home if you're a first-time home buyer.
You can also withdraw up to $10,000 a year for full-time training or education for you, your spouse or common-law partner.
Money put in an RRSP account is mainly reserved for retirement. So, there are rules around how the money gets withdrawn and how much money can be contributed.
These are the actual investments that go into your account. They can be low-risk, like savings accounts or term deposits; or high-risk, like stocks. Mutual funds* sit in the middle and have a variety of risk levels. You can also choose a mix.
To be eligible you must be:
To open an account, meet with an advisor. If you want to invest on your own, check out our ways to invest online.
Put your money into the investment, or multiple investments, that you chose above. You have a total contribution limit that increases every year that you have "earned income". There’s a penalty if you over-contribute.
Over time, you should see your investment grow. As time passes, continue to make contributions and even add different types of investments to the mix so you can save and earn more.
You can deduct your contributions from your taxable income and save taxes. Note, you don’t have to deduct your contributions within the same year that you make them. In some cases, you may see more benefit in deducting over several years, or in higher income years.
By the end of the year you turn 71, your RRSP must be converted. Most people will convert it into a RRIF and start withdrawing from it as their retirement income the next year. This will be taxable, but you’ll likely be in a lower tax bracket. Cashing out is an option but it's generally not recommended. Buying annuities are another option.
You can also withdraw earlier from your RRSP for your first home or education if it meets certain criteria. Money withdrawn for those purposes won't count towards your taxable income that year.
In 2023, your contribution room is 18% of last year’s earned income or $30,780, whichever’s lower – plus, any unused contribution room carried over from before.
Contributions made in the first 60 days of the year can be used to reduce your taxable income for the previous year or any year after. In the year that you turn 71, the last day to contribute is Dec. 31.
If you earn significantly more than your spouse or common-law partner, you may benefit from contributing to a spousal RRSP. This could help you save taxes when the two of you withdraw from your RRSPs at retirement.
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What if I don’t use all my RRSP contribution limit?
Unused contribution room can be carried forward to use in any future year. However, contributions must be made by the end of the year the owner of the RRSP turns 71.
Do I have to immediately deduct all my RRSP contributions?
No. You can choose when to deduct them on your income tax file while continuing to invest. Deduct them now, or in a future year, or even divide them between years. Waiting to deduct contributions may increase your tax savings.
We suggest you check with your tax advisor or your Vancity investment professional before electing to carry-forward RRSP deductions.
Can I catch up once I'm retired?
Yes. Many people forget they can contribute even without current earned income (for example, after retiring). If you have unused RRSP contribution room from past years and funds available, contributing to your own or your spouse's RRSP is allowed up until the end of the year the
planholder turns age 71.
Watch out for special situations where contributing to an RRSP may not make sense. For example, where you'll lose eligibility for the Guaranteed Income Supplement (GIS), or your tax rate when withdrawing in retirement will be much higher than your
initial tax savings. Other options, such as a Tax Free Savings Account (TFSA), might be more appropriate for your circumstances.
Talk to us. We can help you create a plan to catch up on unused RRSP contribution room.
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Qtrade Guided Portfolios is a trade name of Credential Qtrade Securities Inc., Member of the Canadian Investor Protection Fund.
*Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual funds, other securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated. NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. ("NEI LP"). Credential Securities, Credential Asset Management Inc., Qtrade Direct Investing, and Northwest & Ethical Investments L.P. are all wholly owned subsidiaries of Aviso Wealth Inc.
ᶲ Online brokerage services are offered through Qtrade Direct Investing, a division of Credential Qtrade Securities Inc. Qtrade and Qtrade Direct Investing are trade names and trademarks of Aviso Wealth Inc. and its subsidiaries.