RRSP in Ten Questions and Ten Answers

26 Mar 2026

1. What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is a savings account registered with the federal government that allows you to save for retirement while enjoying tax benefits.

2. What are the benefits of an RRSP?

RRSP contributions are tax-deductible, which reduces your taxable income. Additionally, investment income generated within the RRSP accumulates tax-free until withdrawal.

3. Who can contribute to an RRSP?

Anyone who files a tax return in Canada and has earned income can contribute to an RRSP, until the year they turn 71.

4. What is the maximum amount I can contribute?

The RRSP contribution limit is 18% of your previous year's earned income, up to an annual maximum set by the government ($30,780 for 2024). You can also carry forward unused contribution room from previous years.

5. What is earned income?

Earned income includes salaries, self-employment income, net rental income, and certain disability benefits. It excludes investment income, capital gains, and pension benefits.

6. When should I contribute to benefit from the tax deduction?

You can contribute at any time during the year, but to benefit from the tax deduction for a given year, you must contribute by March 1st of the following year (or February 29th in leap years).

7. What happens if I over-contribute?

If you exceed your contribution limit by more than $2,000, you will have to pay a penalty of 1% per month on the excess. It's important to check your available contribution room on your notice of assessment.

8. When can I withdraw money from my RRSP?

You can withdraw money at any time, but withdrawals are taxable as income. There are two exceptions: the Home Buyers' Plan (HBP) and the Lifelong Learning Plan (LLP), which allow temporary non-taxable withdrawals.

9. What happens to my RRSP at age 71?

By December 31st of the year you turn 71, you must convert your RRSP into a Registered Retirement Income Fund (RRIF), purchase an annuity, or withdraw the funds (which will then be taxable).

10. Can I contribute to my spouse's RRSP?

Yes, you can contribute to your spouse's RRSP using your own contribution room. This allows for income splitting in retirement and can potentially reduce the couple's overall tax burden. However, withdrawals made within three years of the contribution are taxed in the contributor's name.

The information in this article is for general purposes only and may not reflect current laws or regulations. Verify any details with a qualified professional before making decisions. Some portions may have been created with AI assistance and should be confirmed for accuracy.