What is an RRSP? Registered Retirement Savings Plan Guide Canada 2026

Claire Beaumont·Personal Finance Writer·April 2026

Last updated May 2026

What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is a government-registered investment account that lets Canadians save for retirement with two major tax advantages: contributions are tax-deductible (reducing your income this year), and all growth inside the account is tax-sheltered until you withdraw.

Think of it as the government's deal: invest now, pay tax later — and in the meantime, the money that would've gone to taxes stays invested and compounds for you.

💡 The Core Idea

You earn $80,000. You contribute $15,000 to your RRSP. Your taxable income drops to $65,000. The tax savings could be $4,000–$6,000 returned as a refund. Invest that refund in your TFSA and you've used the system to its full potential.

How Does an RRSP Work?

Every year, you earn new RRSP contribution room equal to 18% of your previous year's earned income, up to an annual maximum. Unused room carries forward indefinitely — so if you haven't been contributing, you may have years of unused room right now.

Your exact contribution room is shown on your CRA Notice of Assessment, or on CRA My Account.

RRSP Contribution Limits 2026

Year	Annual Maximum	% of Prev. Year Income
2021	$27,830	18%
2022	$29,210	18%
2023	$30,780	18%
2024	$31,560	18%
2025	$32,490	18% ✦ Current
2026	TBD (~$33,800)	18% of 2025 income

✦ 2025 limit applies to contributions made in 2026 before the March deadline. Check your exact room on CRA My Account.

⚠️ RRSP Deadline 2026

To claim an RRSP deduction on your 2025 tax return, contributions must be made by March 2, 2026. After that date, any contributions count toward your 2026 return.

What Can You Hold in an RRSP?

Just like a TFSA, your RRSP at a brokerage like Wealthsimple can hold:

Stocks — Canadian and US equities
ETFs — the most popular choice for long-term investors
Bonds — government and corporate fixed income
GICs — guaranteed return products
Mutual funds — actively managed options

One key advantage: US dividends held in an RRSP are not subject to the 15% withholding tax that applies in a TFSA — making an RRSP especially efficient for US dividend stocks or ETFs.

RRSP Withdrawal Rules

You can withdraw from your RRSP at any time, but withdrawals are added to your taxable income in the year you take them. A withholding tax of 10–30% (depending on the amount) is applied at withdrawal as a prepayment against your tax bill.

The RRSP must be converted to a RRIF (Registered Retirement Income Fund) by December 31 of the year you turn 71. After that, minimum annual payments are taxed as income — ideally at a lower rate than your working years.

Two Special Withdrawal Programs

Home Buyers' Plan (HBP): Withdraw up to $35,000 ($70,000 per couple) tax-free for a first home, repaid over 15 years. The new FHSA is often better for first-time buyers.
Lifelong Learning Plan (LLP): Withdraw up to $10,000/year (max $20,000 total) for full-time education, repaid over 10 years.

RRSP Pros & Cons

✅ Advantages

Contributions reduce taxable income now
Tax-deferred growth until withdrawal
No US dividend withholding tax
Home Buyers' Plan and LLP access
Unused room carries forward forever
Spousal RRSP for income splitting

❌ Limitations

Withdrawals taxed as income
Must convert to RRIF at 71
Withholding tax on withdrawals
Over-contribution penalty (1%/month over $2K buffer)
Less flexible than a TFSA

RRSP vs TFSA — Which First?

→Income under $50K/year: Start with a TFSA — the RRSP deduction is worth less at a low marginal rate.
→Income $50K–$100K: Both are valuable. Consider maxing your TFSA first, then RRSP.
→Income over $100K: RRSP becomes very powerful — you're deferring tax from a high rate today to a lower rate in retirement.
→Buying your first home: Check the FHSA first — it combines RRSP and TFSA benefits for first-time buyers.

Smart RRSP Strategies

💰

Invest your tax refund in your TFSA

An RRSP contribution of $15,000 at a 33% marginal rate generates a ~$5,000 refund. Deposit that refund straight into your TFSA and you've used both registered accounts in one move.

📅

Delay your RRSP deduction to a higher-income year

You don't have to claim your RRSP contribution the same year you make it. If you contribute in a low-income year, carry the deduction forward to a year with higher income and a higher marginal rate — worth more.

👫

Use a spousal RRSP for income splitting

If one partner earns significantly more, contribute to a spousal RRSP. In retirement, withdrawals come out at the lower-earning spouse's tax rate — potentially saving thousands annually.

📈

Hold US equities in your RRSP

The Canada–US tax treaty exempts RRSP-held US dividends from 15% withholding tax. Put your S&P 500 or VFV holdings here rather than in your TFSA to capture this treaty benefit.

Sources & References

This guide is for informational purposes only. For personalized advice, consult a qualified tax professional or financial planner.

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FAQ

The 2026 RRSP contribution limit is 18% of your 2025 earned income, up to a maximum that the CRA sets each year (estimated ~$33,800). The 2025 annual limit was $32,490. Your exact available room — including any unused room from prior years — is shown on your Notice of Assessment or CRA My Account.

To claim an RRSP contribution on your 2025 tax return, you must contribute by 60 days after December 31, 2025 — typically March 1 or 2, 2026. Contributions after that date count toward your 2026 return.

Yes, but withdrawals are added to your taxable income in the year you take them, and a withholding tax is applied at source (10–30% depending on the amount). Unlike a TFSA, the room is not restored. The Home Buyers' Plan ($35,000) and Lifelong Learning Plan ($20,000 total) offer tax-free withdrawal options with repayment requirements.

You must convert your RRSP to a RRIF (Registered Retirement Income Fund) or annuity by December 31 of the year you turn 71. A RRIF requires minimum annual withdrawals that are taxed as income — ideally at a lower rate than during your working years.

For most Canadians earning under $50,000, start with the TFSA — the RRSP tax deduction is worth relatively little at a low marginal rate. For income over $80,000–$100,000, RRSP contributions become more powerful because you're deferring tax from a high rate today to a lower rate in retirement. Many Canadians eventually use both strategically.

A spousal RRSP lets you contribute to an RRSP in your spouse's name while claiming the deduction yourself. This is a powerful income-splitting strategy: if you expect to earn more in retirement than your spouse, putting money in a spousal RRSP now means withdrawals are taxed in their hands at a lower rate. The spouse must wait 3 years after the last contribution before withdrawing, or the attribution rules apply.

You can contribute any time you have unused RRSP room from prior years — room doesn't require current income. However, you can only generate new RRSP room from earned income. If you have no income this year but have unused room from prior working years, you can still contribute. You may choose to delay claiming the deduction until a higher-income year.

The CRA allows a $2,000 lifetime over-contribution buffer without penalty. Any amount over $2,000 above your available room is subject to a 1% per-month penalty tax. Unlike the TFSA, the RRSP penalty applies on everything above the $2,000 buffer. Always track your contributions carefully on CRA My Account.

Under the Canada–US tax treaty, dividends from US companies held in an RRSP are exempt from the standard 15% US withholding tax. This is a significant advantage: the same US dividend ETF held in a TFSA would have 15% of every dividend withheld at source. For US dividend income, the RRSP is the most tax-efficient registered account.

Yes — RRSPs can hold US dollars and other foreign currencies. At Wealthsimple, you can hold USD directly in your RRSP to avoid constant currency conversion. This is useful if you're buying US-listed ETFs or stocks and want to avoid repeated CAD–USD conversion costs on dividends and proceeds.

What is an RRSP? The Complete Canadian Guide