RRSP 101

A registered retirement savings plan (RRSP) is a way to save for retirement.

It offers 2 tax advantages:

  • Your contributions are deducted from your taxable income, which reduces your income taxes (tax deferred to disbursement).
  • The return on your investment is tax-sheltered. It is reinvested in your RRSP, so your investment grows faster.

How much can I contribute?

You can contribute 18% of your previous year's income to your RRSP, up to a maximum amount determined annually by the Canada Revenue Agency. You'll find all the details in the table below.

Take this amount and deduct from it your pension adjustment (PA) for the year. Your employer calculates the PA based on the benefits accumulated in your name in a supplemental pension plan or a Deferred Profit-Sharing Plan (DPSP).

Maximum RRSP deduction for the following years
Reference year Maximum deduction
2009 $21,000
2010 $22,000
2011 $22,450
2012 $22,970
2013 $23,820
2014 $24,270
2015 $24,930

By law, you are allowed to contribute up to $2,000 over your maximum, without penalty. The exceeding amount cannot be deducted from your taxable income for the current year but it can be deducted for subsequent years.

When to contribute

To contribute a significant amount to your RRSP annually without straining your budget, contribute throughout the year and avoid the February rush.

Your capital is in a tax shelter for a longer period of time since your contributions earn interest from day one. And your returns grow faster than if you contributed only once a year.

How to contribute

Select a regular instalment plan where your contributions are withdrawn directly from your account. You'll see: a few dollars each week or month adds up.

Simply authorize your financial institution to withdraw from one of your accounts the amount you choose. You can change the transfer amount and frequency any time you wish.

Tools and tips

RRSP: Don't wait

The sooner you start contributing, the better!

Read tip - The advantages of making early RRSP contributions

Unused RRSP contribution room

If you haven't been contributing your maximum, you can catch up by using your unused contribution room in subsequent years.

Read tip - Using your unused contribution room

An RRSP loan can help you increase your contribution

Borrowing $10,000 for your RRSP could pay off in a big way.

Read tip - Borrowing to contribute to your RRSP

Couples can pay less tax

The higher-earner can contribute to his or her spouse's registered retirement savings plan (RRSP).

Read tip - Contributing to your spouse's RRSP

HBP: Using your RRSP to buy home

How to withdraw part or all of your RRSPs without paying income taxes.

Read tip - Withdrawing from your RRSP without penalty to buy a property

Should you put your savings in an RRSP or a TFSA?

It all depends on what you want to do with your money.

Read tip - Comparing TFSAs and RRSPs

Invest it or spend it?

If you come into an inheritance or win the lottery, know how to manage a financial windfall.

Read tip - Unexpected windfall: Invest or spend?