RRSP — Registered Retirement Savings Plan
Last updated April 24, 2026 · By Evermore Private Wealth · Registered Account
RRSP — Registered Retirement Savings Plan. A Registered Retirement Savings Plan (RRSP) is a Canadian tax-deferred retirement account. Contributions are deducted from current taxable income, investments grow tax-free inside the plan, and withdrawals are taxed as ordinary income — typically in retirement, when the holder is in a lower tax bracket. The 2026 RRSP contribution limit is the lesser of 18% of prior-year earned income or $32,490.
Source: CRA, RRSP Limits 2026
Source: CRA
Source: Income Tax Act, s. 146(2)
How the RRSP works
Every dollar contributed reduces your taxable income for the year, generating an immediate refund at your marginal rate. Inside the plan, investments compound without tax. When you withdraw — usually after converting to a RRIF at age 71 — the entire amount is taxed as regular income.
The "deferral" only pays off if your retirement marginal rate is lower than your contribution-year marginal rate. For high earners, the spread is often dramatic: contributing at a 53.53% Ontario marginal rate and withdrawing later at 30% creates a permanent tax arbitrage, not just a deferral.
Spousal RRSPs and income splitting
A spousal RRSP allows a higher-earning spouse to contribute to an RRSP owned by the lower-earning spouse. Future withdrawals are taxed in the lower-earning spouse's hands, splitting retirement income. Note the three-year attribution rule: contributions made in the current or prior two years are taxed back to the contributor if withdrawn early.
What this means for HNW Canadian families
For incorporated professionals and business owners, the RRSP deduction is often the most under-used tax tool — because it competes with the option of leaving money in the corporation. Our rule of thumb at $1M+ household income: max the RRSP every year regardless. The 53.53% marginal-rate refund typically outperforms corporate-class growth on a 20-year horizon, especially after the 2018 passive-income rules eroded the small-business deduction.
Worked example — RRSP tax arbitrage
An Ontario surgeon earning $400,000 contributes $32,490 to an RRSP. They receive a refund of approximately $17,400 (53.53% marginal rate). Twenty years later, they withdraw the same $32,490 in retirement at a 30% effective rate, paying $9,747 in tax. The deferral and rate arbitrage combined save $7,653 of permanent tax — before counting the tax-free compounding inside the plan.
Common Questions
What is the 2026 RRSP contribution limit?
The 2026 RRSP contribution limit is the lesser of 18% of your 2025 earned income or $32,490. Unused room from prior years carries forward and is shown on your most recent CRA Notice of Assessment.
When is the 2025 RRSP deadline?
Contributions made on or before March 2, 2026 (the first business day after the 60th day of the calendar year) can be deducted on your 2025 tax return.
Can I withdraw from my RRSP before retirement?
Yes, but the financial institution must withhold 10–30% (provincially varies for Quebec residents) and the full withdrawal is added to your taxable income for the year. Two exceptions allow tax-free withdrawals if repaid: the Home Buyers' Plan ($60,000 as of 2024) and the Lifelong Learning Plan ($20,000).
What happens to my RRSP at age 71?
By December 31 of the year you turn 71, the RRSP must be converted — typically to a RRIF, an annuity, or a combination. If left as cash, the full balance becomes taxable in that year, which is almost always the worst outcome.
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