RRSP: Canada's Tax-Deferred Retirement Account Explained
A Registered Retirement Savings Plan (RRSP) is a Canadian tax-advantaged account designed for retirement savings. Contributions are deductible from taxable income in the year they're made, investments inside the account grow tax-deferred, and withdrawals in retirement are taxed as ordinary income.
2 min read · Updated June 2026
An RRSP is a tax wrapper, not an investment. Inside it you can hold cash, GICs, mutual funds, ETFs, individual stocks, and bonds. The same VEQT, XEQT, or VFV ETFs that compound tax-free inside a TFSA also work inside an RRSP — but the tax mechanics differ. The RRSP gives you an upfront deduction now and taxes the withdrawal later; the TFSA does the opposite.
Contribution room for 2026 is the lesser of 18% of your prior-year earned income and the annual dollar limit ($33,810 for 2026, up from $32,490 in 2025). Unused room carries forward indefinitely and accumulates from the year you first filed a Canadian tax return. Your exact room is published in your CRA My Account and on your most recent Notice of Assessment — verify there before maxing out, since over-contributions trigger a 1%-per-month penalty.
The RRSP-vs-TFSA decision is the central retirement planning question for most Canadians. The rule of thumb: contribute to whichever wrapper has the lower expected tax rate at withdrawal versus contribution. A teacher earning $75,000 today expecting $60,000 in retirement faces roughly the same marginal rate either way, so the TFSA's tax-free withdrawal often wins. A specialist earning $250,000 today expecting $90,000 in retirement gets a much larger deduction now than the eventual tax on withdrawal — the RRSP wins. Most Canadians end up using both.
Two RRSP withdrawal programs are worth knowing. The Home Buyers' Plan (HBP) lets first-time home buyers withdraw up to $60,000 (raised from $35,000 in 2024) tax-free for a down payment, repayable over 15 years. The Lifelong Learning Plan (LLP) lets you withdraw up to $20,000 for full-time education for yourself or your spouse, repayable over 10 years. Both are interest-free loans from your future self — the cost is the lost compound growth on the withdrawn amount.
RRSPs must be converted to a Registered Retirement Income Fund (RRIF) by December 31 of the year you turn 71. Minimum annual withdrawals begin the year after conversion and are set on a CRA schedule that ramps up with age — starting at ~5.28% at age 72 and reaching 20% at age 95. Plan ahead: large unstructured RRSPs at retirement can create surprise tax bills and OAS clawback once forced withdrawals push your income above the recovery threshold.
Richify projects your RRSP balance to age 71, models the deduction value at your current marginal rate, and warns when an extra contribution would push you into a lower tax bracket where the TFSA might be a better wrapper instead.
