RRSP Explained: The Ultimate Guide for Canadian Retirement Savings

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The RRSP: Canada's Premier Tax-Deferred Retirement Account

The RRSP is the cornerstone of retirement planning for Canadians. Every dollar you contribute reduces your taxable income today, and your investments grow tax-free until retirement.

Whether you're just starting your career or planning your retirement strategy, understanding your RRSP is essential. Here's your complete guide.

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What is an RRSP?

The Registered Retirement Savings Plan (RRSP) is a government-registered account that lets you save for retirement while getting immediate tax benefits. Contributions reduce your taxable income today, and your investments grow tax-free until you withdraw them in retirement.

Think of it as a deal with the government: They give you a tax break now in exchange for you saving for your own retirement later. When you retire and withdraw the money, you’ll likely be in a lower tax bracket—so you pay less tax overall.

Immediate Tax Deduction

Every dollar contributed reduces your taxable income. A $10,000 contribution could save you $3,000+ in taxes this year (at 30% marginal rate).

Tax-Deferred Growth

All investment gains, dividends, and interest grow without being taxed until withdrawal. Your money compounds faster without annual tax drag.

Employer Matching

Many employers offer RRSP matching—free money! If your employer matches 50% of contributions, that's an instant 50% return.

Home Buyers' Plan

First-time home buyers can withdraw up to $60,000 from their RRSP tax-free for a down payment (must repay over 15 years).

Lifelong Learning Plan

Withdraw up to $20,000 for education or training for you or your spouse, tax-free (must repay over 10 years).

Spousal RRSP

Income split with your spouse by contributing to their RRSP. You get the tax deduction, and they withdraw at their lower tax rate later.

2025 RRSP Contribution Limits

2025 Maximum Contribution
$32,490
Or 18% of your 2024 earned income, whichever is less

Your RRSP contribution room is calculated as 18% of your previous year's earned income, up to the annual maximum. Unlike the TFSA, your limit depends on your income—the more you earn, the more you can contribute.

Historical RRSP Contribution Limits

Tax Year Maximum Contribution Based on Income From
2025 $32,490 2024
2024 $31,560 2023
2023 $30,780 2022
2022 $29,210 2021
2021 $27,830 2020

Pro Tip: Check your exact contribution room by logging into your CRA My Account. Unused room from previous years carries forward indefinitely, so you may have more room than you think.

RRSP Tax Season Deadline

Unlike other registered accounts, the RRSP has a special contribution deadline tied to tax season. For your contributions to count toward the previous tax year, you must contribute by:

March 3, 2025 (for 2024 tax year)

This creates a powerful opportunity during RRSP season (February-March) to reduce last year's tax bill. If you owe taxes, an RRSP contribution can reduce or eliminate your tax owing—and potentially get you a refund instead.

  • Contribute before the deadline to reduce your previous year's taxable income
  • Use your tax refund wisely—reinvest it in your RRSP for compound growth
  • Don't wait until the deadline—contribute throughout the year when you have cash flow

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How the RRSP Actually Works

Understanding the RRSP is straightforward once you grasp a few key concepts:

Contributions

Withdrawals

At Retirement (Age 71)

Important: Early withdrawals from your RRSP (before retirement) are generally a bad idea. You lose the contribution room forever, pay withholding tax immediately, and add the withdrawal to your taxable income for the year.

RRSP vs TFSA: Which Should You Use First?

This is the most common question Canadian investors face. The right answer depends on your income and tax situation.

RRSP vs TFSA Comparison

Feature RRSP TFSA
Tax on Contributions Tax-deductible After-tax (no deduction)
Tax on Withdrawals Taxed as income Tax-free
Tax on Growth Tax-deferred Tax-free
Contribution Limit 18% of income (max $32,490) $7,000/year (same for all)
Withdrawal Impact Lose room permanently Room restored next year
Affects Benefits? Yes (OAS, GIS clawback) No impact on benefits
Age Limit Convert at 71 No limit
Best For High earners, retirement Most Canadians, flexibility

General Rule: If your marginal tax rate is above ~30%, prioritize RRSP. If below, prioritize TFSA.

When RRSP Wins

When TFSA Wins

The Ideal Strategy: For most middle-income Canadians, max out your TFSA first, then contribute to your RRSP—especially if your employer offers matching. If you're a high earner (over ~$100K), prioritize RRSP for the larger tax deduction.

The Best RRSP Investment Strategy: RRSP + XEQT

For long-term retirement investing, the strategy is simple: Put XEQT in your RRSP and let it grow tax-deferred for decades.

Why XEQT + RRSP is the Perfect Retirement Combo

XEQT is a single ETF that holds over 12,000 stocks from around the world. It's automatically rebalanced and costs just 0.20% per year. Combined with the tax-deferred nature of an RRSP, it's a powerful wealth-building strategy for retirement.

  • Maximum Long-Term Growth: XEQT is 100% equities, designed for long-term growth over 10+ year horizons
  • Tax-Deferred Compounding: No annual taxes on dividends or rebalancing—your money compounds faster
  • Global Diversification: Own companies in Canada, US, Europe, and emerging markets in one fund
  • Automatic Rebalancing: XEQT maintains its global allocation automatically—set and forget
  • Ultra-Low Fees: 0.20% MER means more of your money stays invested

The retirement formula: Tax deduction today + tax-deferred growth for decades = Comfortable retirement.

Example: The Power of RRSP + XEQT

Let’s say you contribute $10,000 per year to your RRSP and invest in XEQT, earning an average 7% return:

Plus, if you’re in a 30% tax bracket, your $10,000 annual contribution saves you $3,000 in taxes every year. Reinvest that refund, and you’ll build wealth even faster.

Use our compound interest calculator to run your own scenarios.

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Best Platform for Your RRSP

Where you open your RRSP matters—especially when it comes to fees and ease of use.

Why Wealthsimple is the Best RRSP Platform

Wealthsimple is the clear winner for Canadian RRSP investors. Here's why we recommend it:

$0 Commissions Buy XEQT without paying trading fees
$0 Minimum Start with any amount, even $1
Fractional Shares Invest every dollar, not just whole shares
5-Minute Setup Open your RRSP from your phone
Auto-Deposits Set up automatic contributions
CIPF Protected Your investments are protected up to $1M

Traditional banks charge $9.95 per trade, which eats into your returns—especially if you invest regularly. Wealthsimple's commission-free trading means every dollar goes directly into your retirement savings.

Over 3 million Canadians trust Wealthsimple with their investments.

Learn more about why Wealthsimple is the best platform for Canadian investors.

How to Open Your RRSP (5 Minutes)

  1. Click Our Referral Link
    Use this link to sign up for Wealthsimple and get $25 towards your first investment.
  2. Select "RRSP" as Your Account Type
    When prompted, choose Registered Retirement Savings Plan. You can add other accounts later.
  3. Verify Your Identity
    Quick photo ID verification with your driver's license or passport. Takes about 2 minutes.
  4. Fund Your Account
    Link your bank and transfer funds. Instant deposits let you invest right away.
  5. Search for XEQT and Buy
    Type "XEQT" in the search bar, enter your amount, and purchase. Set up automatic contributions to invest consistently.

That's it—you're now building retirement wealth with immediate tax savings.

Common RRSP Mistakes to Avoid

1. Not Taking Employer Matching

If your employer matches RRSP contributions, that's free money. Always contribute at least enough to get the full match—it's an instant 50-100% return on your contribution.

2. Contributing When Your Income Is Low

RRSP contributions are more valuable when you're in a higher tax bracket. If you're early in your career earning under $50K, consider maxing your TFSA first and saving your RRSP room for when your income (and tax rate) is higher.

3. Withdrawing Early

Early RRSP withdrawals are taxed as income AND you lose the contribution room forever. Only withdraw early through the Home Buyers' Plan or Lifelong Learning Plan if you'll repay it.

4. Leaving Contributions in Cash

Money sitting in your RRSP as cash isn't growing. Invest it immediately in something like XEQT to take advantage of tax-deferred compounding.

5. Over-Contributing

Contributions exceeding your limit by more than $2,000 face a 1% per month penalty. Always check your CRA My Account for your exact contribution room before making large contributions.

Frequently Asked Questions

How do I check my RRSP contribution room?

Log into CRA My Account online. Your available contribution room is displayed under "RRSP and TFSA" limits. It's also on your Notice of Assessment from your last tax return.

What's the RRSP contribution deadline?

For contributions to count toward the previous tax year, you must contribute within the first 60 days of the new year. For 2024 taxes, the deadline is March 3, 2025. Contributions after that count toward 2025.

Can I have multiple RRSPs?

Yes, you can have RRSPs at different institutions. However, your total contribution room is shared across all accounts. The combined contributions cannot exceed your limit.

What's the Home Buyers' Plan (HBP)?

The HBP lets first-time home buyers withdraw up to $60,000 from their RRSP tax-free for a down payment. You must repay the amount over 15 years (starting the second year after withdrawal), or the unpaid amount is added to your taxable income.

What happens to my RRSP when I turn 71?

By December 31 of the year you turn 71, you must convert your RRSP to a RRIF (Registered Retirement Income Fund), an annuity, or withdraw it (and pay tax). Most people choose a RRIF, which requires minimum annual withdrawals but lets your investments keep growing.

Should I contribute to my RRSP or pay down my mortgage?

It depends on your mortgage rate and tax bracket. Generally, if your marginal tax rate is higher than your mortgage rate, RRSP contributions win. Plus, you can use your tax refund to make extra mortgage payments—getting the best of both.

What's a spousal RRSP?

A spousal RRSP lets you contribute to your spouse's RRSP while you get the tax deduction. This is useful for income splitting in retirement—if your spouse will have lower income, they'll pay less tax on withdrawals than you would.

Are RRSP withdrawals taxed?

Yes. RRSP withdrawals are added to your taxable income for the year and taxed at your marginal rate. Tax is withheld at source (10% for withdrawals up to $5,000, 20% for $5,001-$15,000, 30% for over $15,000), but your actual tax owing depends on your total income.

Start Building Your Retirement Today

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The Bottom Line

The RRSP is one of the most powerful tools for building retirement wealth in Canada. The tax deduction reduces your tax bill today, and decades of tax-deferred growth can turn modest contributions into a substantial nest egg.

The strategy is simple:

  1. Open an RRSP at a commission-free platform like Wealthsimple
  2. Contribute regularly—especially if your employer offers matching
  3. Buy XEQT for instant global diversification
  4. Let it compound for decades without tax drag
  5. Withdraw in retirement when you’re in a lower tax bracket

Every year you delay is a year of tax-deferred growth you’re missing out on.

Open your RRSP. Buy XEQT. Build retirement wealth.

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