Introduction to RRSP
A Registered Retirement Savings Account (RRSP) is a popular way to save for retirement in Canada. It allows you to contribute a portion of your income to a savings account, which can be invested in a variety of assets such as stocks, bonds, and mutual funds. The contributions are tax-deductible, and the investments grow tax-free until withdrawal.
How RRSP Contribution Limits Work
Every year, the government sets a limit on how much you can contribute to your RRSP. This limit is based on your previous year’s income and previous contribution levels. If you don’t fully contribute to your RRSP, you can carry over the limit and contribute more than is allowed for the following year. Additionally, if you are part of an employer pension plan, your RRSP contribution room will be reduced by a “pension adjustment” (PA), which can be found on your T4.
Types of RRSP Accounts
There are several types of RRSP accounts, including:
- Individual RRSP: You are responsible for investments and can claim tax deductions.
- Spousal RRSP: You can contribute to your spouse’s account and claim the tax deduction yourself.
- Group RRSP: Your employer offers a group plan, and you can designate a portion of your paycheck to be deposited into the account.
Key Things to Remember About RRSPs
One of the most important things to remember about an RRSP is that you fund the account with money that has not yet been taxed. This means you pay taxes at the time of withdrawal.
RRSP Contribution Limits Per Year
The annual contribution cap for RRSPs has been increasing over the years. Here are the limits for each year since 2014:
- 2026: $33,810
- 2025: $32,490
- 2024: $31,560
- 2023: $30,780
- 2022: $29,210
- 2021: $27,830
- 2020: $27,230
- 2019: $26,500
- 2018: $26,230
- 2017: $26,010
- 2016: $25,370
- 2015: $24,930
- 2014: $24,270
RRSP Deadline
The RRSP deadline is always 60 days into the following calendar year. For example, the deadline for submitting contributions for 2025 is March 2, 2026.
Finding Your RRSP Contribution Limit
You can find your RRSP contribution limit by:
- Logging in to your CRA account
- Checking your assessment notice
- Calling the Tax Information Phone Systems (TIPS) number
- Reviewing your RRSP deduction limit statement
What Happens if You Contribute Too Much to Your RRSP
If you overcontribute more than $2,000 to your RRSP, a penalty tax will apply. The penalty is typically 1% per month on the excess contribution as long as it remains in your account.
Age Limit for Contributions
You can contribute to an RRSP until December 31 of the year you turn 71. After that, you will need to cash out your RRSP, convert it to a Registered Retirement Income Fund (RRIF), or purchase an annuity.
Types of Investments You Can Hold in an RRSP
The government allows you to include the following in your RRSP:
- Cash
- Guaranteed Investment Certificates (GICs)
- Investment funds (mutual funds and exchange-traded funds)
- Bonds
- Stocks
Using Your RRSP Money
You can withdraw your RRSP money at any time, but there are two programs that allow you to withdraw money tax-deferred: the Home Buyers’ Plan (HBP) and the Lifelong Learning Plan (LLP). The HBP allows you to withdraw up to $60,000 to fund the down payment on a first home, while the LLP allows you to withdraw up to $10,000 per year to cover post-secondary education costs.
Conclusion
RRSPs are a great way to save for retirement, and understanding how they work can help you make the most of your contributions. By knowing your contribution limit, the types of investments you can hold, and the rules around withdrawals, you can create a solid retirement plan and achieve your financial goals. Remember to always check your contribution limit and plan your contributions accordingly to avoid penalties and make the most of your RRSP.