RRSP (Registered Retirement Savings Plan)
An RRSP is a government-registered account where contributions are tax-deductible and investments grow tax-free until withdrawal. When you contribute to an RRSP, the amount is deducted from your taxable income — effectively saving you tax at your marginal rate. Your contribution room is 18% of the previous year's earned income, up to an annual maximum ($32,490 in 2025, rising to $33,810 in 2026).
RRSPs are most valuable when you contribute while in a higher tax bracket and withdraw in retirement at a lower rate. You can hold a wide range of investments inside an RRSP, including stocks, bonds, GICs, mutual funds, and ETFs. Unused contribution room carries forward indefinitely, and you can check your available room on your NOA or through CRA My Account.
By December 31 of the year you turn 71, you must convert your RRSP to a RRIF (which requires minimum annual withdrawals) or purchase an annuity. Special programs allow early tax-free RRSP withdrawals: the Home Buyers' Plan (HBP) for purchasing a first home and the Lifelong Learning Plan (LLP) for education.
How it works
Your RRSP contribution room builds each year based on 18% of the previous year's earned income, up to the annual maximum, and any room you don't use simply carries forward, indefinitely, to future years. You can always check your current available room on your Notice of Assessment or through CRA My Account, which is the most reliable source since it accounts for prior contributions and any pension adjustment.
If you belong to a workplace pension plan, your employer reports a pension adjustment that reduces your RRSP room for the following year, so the two systems don't let you shelter the same income twice. This interaction catches people off guard when their RRSP room is lower than expected despite a raise, since the pension adjustment grows along with employer contributions.
By December 31 of the year you turn 71 you must convert your RRSP into a RRIF or purchase an annuity, since the account can't remain an RRSP indefinitely. Two programs let you access RRSP funds early without triggering tax, provided you repay on schedule: the Home Buyers' Plan for a first home purchase and the Lifelong Learning Plan for full-time education.
Example: The tax saving from an RRSP contribution
Say you contribute $10,000 to your RRSP in a year when your combined federal and provincial marginal tax rate is 40%. That contribution is deducted from your taxable income, so you save $10,000 times 40%, which is $4,000 in tax, either as a smaller balance owing or a larger refund when you file your T1.
The saving depends entirely on your marginal rate at the time you contribute, which is why RRSPs work best when you contribute in high-income years and withdraw later in retirement, when your income and marginal rate are typically lower.
Frequently asked questions
What happens to RRSP room I don't use?
It carries forward indefinitely, so you never lose it; you can catch up in a later year when your income, and therefore your marginal tax rate, is higher.
Can I keep contributing to my RRSP after age 71?
No, you must convert your RRSP into a RRIF or an annuity by December 31 of the year you turn 71, at which point new contributions to that account stop.
How does a workplace pension affect my RRSP room?
Your employer reports a pension adjustment on your T4 that reduces your RRSP contribution room for the following year, preventing double tax-sheltering of the same income.
Related Terms
RRIF (Registered Retirement Income Fund)
A RRIF is the account you convert your RRSP into when you're ready to start drawing retirement income.
HBP (Home Buyers' Plan)
The Home Buyers' Plan (HBP) allows first-time home buyers to withdraw up to $60,000 from their RRSP tax-free to purchase or build a qualifying home.
LLP (Lifelong Learning Plan)
The Lifelong Learning Plan (LLP) allows you to withdraw up to $10,000 per year from your RRSP (maximum $20,000 total) to finance full-time training or education for yourself or your spouse.
Pension Adjustment (PA)
If you belong to a Registered Pension Plan (RPP) or Deferred Profit Sharing Plan (DPSP) through your employer, your employer reports a Pension Adjustment (PA) on your T4 slip.
TFSA (Tax-Free Savings Account)
A TFSA allows Canadian residents aged 18 and older to invest money and withdraw it at any time without paying tax on the growth.
Tax Deduction
A tax deduction reduces your taxable income before tax is calculated, effectively saving you money at your marginal tax rate.