The Registered Retirement Savings Plan is Canada's primary retirement savings vehicle. Every dollar you contribute reduces your taxable income this year; every dollar grows tax-deferred until withdrawal. Understanding what to invest inside your RRSP, and how to maximize its value, can add hundreds of thousands of dollars to your retirement.
The 2025 RRSP contribution limit is 18% of your 2024 earned income, to a maximum of $31,560. Any unused room from previous years carries forward indefinitely. Check your notice of assessment or CRA My Account for your exact available room.
The Canada-US tax treaty exempts RRSPs from the 15% US withholding tax on dividends. Hold US equity ETFs (VUN, VTI, SPY) in your RRSP rather than TFSA to avoid this withholding tax. This is one of the clearest account-location decisions in Canadian personal finance.
RRSP growth is tax-deferred — the more it grows, the bigger the eventual tax-free compounding and the larger the deferred tax benefit. High-growth equity ETFs (VGRO, XGRO, VEQT) are excellent RRSP holdings.
Interest income is taxed at the highest rate — sheltering it in an RRSP is efficient. Fixed income components belong in registered accounts (RRSP or TFSA) before non-registered accounts.
General rule: if your current tax rate is higher than your expected retirement rate, RRSP wins (deduct at high rate, pay at low rate). If you're in a low bracket now and expect higher income in retirement, TFSA is better. When uncertain, contribute to both — TFSA first for flexibility, then RRSP for the tax deduction.
Contributing to a spousal RRSP allows the higher-earning spouse to take the tax deduction now, while retirement withdrawals (after a 2-year attribution window) are taxed in the lower-earning spouse's hands. This income-splitting strategy can reduce the household tax bill in retirement significantly.
You must convert your RRSP to a RRIF (Registered Retirement Income Fund) by December 31 of the year you turn 71. RRIFs require minimum annual withdrawals that increase as you age. Planning your drawdown strategy — including converting early if it reduces lifetime tax — is worth discussing with a fee-only financial planner.
First-time buyers can withdraw up to $60,000 from their RRSP for a down payment. The withdrawal is tax-free if repaid over 15 years. Ideal for Canadians who have built RRSP savings and are now ready to buy a home.
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