RRSP Complete Guide

RRSP Contribution Limits

2025 Limits

• Maximum: $32,490 (2024: $31,560)
• Or: 18% of previous year's earned income
• Whichever is less

Your Deduction Limit

Found on your Notice of Assessment:

• Base contribution room
• Plus unused room from previous years
• Minus pension adjustment (PA)
• Plus pension adjustment reversal (PAR)

2025 Tax Year Deadline

For the 2025 tax year:

• Deadline: March 2, 2026 (first 60 days of 2026)
• Contributions in first 60 days can apply to previous year
• Or current year—your choice

How RRSP Tax Deduction Works

The Tax Benefit

• Contribution reduces taxable income
• Tax savings = contribution × marginal rate
• Example: $10,000 at 40% rate = $4,000 tax savings

Strategic Deduction Timing

• Can contribute now, deduct later
• Useful if expecting higher income next year
• Carry forward deduction to better year

Types of RRSPs

Individual RRSP

• Most common type
• You contribute, you deduct
• Your retirement savings

Spousal RRSP

• You contribute, spouse owns
• You get the deduction
• Spouse withdraws (their income)
• Income splitting strategy
• 3-year attribution rule applies

Group RRSP

• Through employer
• Often with matching contributions
• Payroll deductions
• Uses your RRSP room

RRSP Investments

Qualified Investments

• Cash and GICs
• Stocks (Canadian and foreign)
• Bonds
• Mutual funds and ETFs
• Some mortgages

Investment Strategy

• Good for interest-bearing investments
• Interest fully taxable outside RRSP
• Foreign dividends avoid withholding issues
• Consider asset allocation across accounts

RRSP Withdrawals

Regular Withdrawals

• Taxed as income when withdrawn
• Withholding tax at source
• Added to taxable income
• Can affect government benefits

Withholding Tax Rates

Quebec rates differ. Withholding is not final tax—settle at filing.

Home Buyers' Plan (HBP)

Withdraw for first home purchase:

• Maximum: $35,000 per person ($70,000 per couple)
• Must be first-time buyer
• Repay over 15 years (1/15 per year)
• No tax if repaid on time
• Miss repayment = added to income

Lifelong Learning Plan (LLP)

Withdraw for education:

• Maximum: $10,000/year, $20,000 total
• For you or spouse's education
• Full-time qualifying program
• Repay over 10 years

Over-Contributions

$2,000 Buffer

• Can over-contribute up to $2,000
• No penalty on this buffer
• But no deduction either
• Grows tax-sheltered

Penalty for Excess

• 1% per month on amount over $2,000
• Must withdraw excess
• File T1-OVP form

Converting RRSP to RRIF

RRIF Deadline

• Must convert by December 31 of year you turn 71
• Can convert earlier
• Minimum withdrawal required annually

RRIF Alternatives at 71

• Convert to RRIF (most common)
• Buy an annuity
• Withdraw entire amount (big tax hit)

RRSP Strategies

Maximize Employer Matching

• Free money—always contribute enough to get full match
• Often 50-100% match up to limit
• Immediate 50-100% return

High Income Years

• Maximize contributions in high-earning years
• Deduction worth more at higher rates
• Carry forward room for peak earning years

Use Refund Wisely

• Reinvest tax refund into RRSP
• Or into TFSA
• Pay down high-interest debt

RRSP Meltdown

• Strategic withdrawals in low-income years
• Before OAS begins (to avoid clawback)
• Equalizes income across retirement

RRSP vs TFSA

RRSP at Death

To Spouse

• Transfers tax-free to spouse's RRSP/RRIF
• No tax until spouse withdraws
• Designate spouse as beneficiary

To Others

• Full value included in final return
• Can be substantial tax hit
• May need to plan around this