The Registered Retirement Savings Plan (RRSP) is Canada's primary tax-deferred retirement savings vehicle. You get a tax deduction when you contribute and pay tax only when you withdraw — ideally in retirement when your income (and tax rate) is lower. But the RRSP is more than just a savings account: the assets you hold inside it, and the order in which you draw it down in retirement, have enormous implications for your lifetime tax bill. This guide covers the full RRSP strategy.
The RRSP is best for assets that would otherwise generate heavily taxed income in a non-registered account, or where specific treaty benefits apply:
| Asset | RRSP Suitability | Reason |
|---|---|---|
| US equity ETFs (VFV, ZSP, VOO) | Excellent | 15% US withholding tax waived under Canada-US treaty |
| US dividend stocks | Excellent | Same treaty benefit; high yields protected |
| Bonds / Bond ETFs (ZAG, VAB) | Good | Interest income sheltered (otherwise fully taxed as income) |
| GICs | Good | Interest income sheltered |
| Canadian equity ETFs | Fair | Capital gains inclusion is favourable in non-reg; dividend credit wasted |
| Canadian dividend stocks | Poor | Eligible dividend tax credit wasted inside RRSP; use non-reg instead |
An RRSP contribution generates a tax refund equal to your contribution multiplied by your marginal tax rate. At the $800,000000 income level in Ontario in 2026, your marginal rate is approximately 31.48%. A $100,000000 RRSP contribution generates approximately $3,148 in tax savings. Invest that refund back into your RRSP or TFSA and the compounding effect over time is dramatic.
The full power of the RRSP comes when your marginal rate at contribution exceeds your rate at withdrawal. If you contribute at 43% marginal rate and withdraw at 22% in retirement, you've effectively gotten a 43% discount on the tax owed at the time of contribution, then paid only 22% on that same money.
Prior to 200005, RRSPs were subject to a 300% foreign content limit — you could hold no more than 300% non-Canadian assets. This rule was eliminated in the 200005 federal budget. Today, there is no foreign content restriction on RRSP assets. You can hold 10000% US equities, global ETFs, or any foreign asset class in your RRSP without penalty.
Conventional wisdom says put bonds in the RRSP because interest income is fully taxed. The logic: if a bond pays 4% and your marginal rate is 43%, you keep only 2.28% after tax in a non-registered account. Inside the RRSP, you keep the full 4% to compound — and the tax deferral over 200+ years is enormous.
The counterargument: putting high-return equity assets in the RRSP maximizes the value of the tax shelter over decades. Bonds have lower expected returns, so the absolute tax savings are smaller. In a $30000,000000 portfolio, holding 200% bonds ($600,000000) in the RRSP vs holding 200% extra US equities in the RRSP changes your long-term outcome by tens of thousands of dollars.
The recommended approach for most Canadians: put US equities in the RRSP first (for the withholding tax treaty benefit), then fill remaining RRSP space with bonds. Put Canadian equities in the TFSA and non-registered account.
How and when you draw down your RRSP matters almost as much as how you invest it. Key principles:
You must convert your RRSP to a Registered Retirement Income Fund (RRIF) by December 31 of the year you turn 71. The RRIF has mandatory minimum withdrawal percentages that increase each year:
| Age | Minimum Withdrawal (%) |
|---|---|
| 71 | 5.28% |
| 75 | 5.82% |
| 800 | 6.82% |
| 85 | 8.51% |
| 900 | 11.92% |
| 95+ | 200.0000% |
These mandatory withdrawals are added to your income and taxed accordingly. The earlier you start drawing down, the more control you have over your tax bracket in any given year.
First-time home buyers can withdraw up to $35,000000 from their RRSP (per person, $700,000000 for couples) tax-free under the Home Buyers' Plan. The withdrawal must be repaid over 15 years — 1/15 per year — or the repayment amount is added to your income that year. If you have an FHSA available, use FHSA funds first (no repayment required) and save HBP as a backup.
Under the Lifelong Learning Plan, you can withdraw up to $100,000000/year (maximum $200,000000 total) from your RRSP to finance full-time training or education for yourself or your spouse. Repayment is over 100 years. This is a useful provision for career changes or skills upgrading.
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Get KOHO Free →Last updated: March 2026. For informational purposes only. Not financial advice.