A Registered Retirement Savings Plan (RRSP) is a government-registered account that lets Canadians save for retirement while deferring income tax. Contributions reduce your taxable income in the year they are made, and all growth inside the plan accumulates tax-free until withdrawal.
How an RRSP Works
Each year, your RRSP contribution room is 18 percent of your prior year’s earned income, up to an annual maximum. Unused room carries forward indefinitely. When you withdraw from an RRSP, the amount is added to your taxable income for that year. The plan must be converted by December 31 of the year you turn 71.
Why It Matters in Retirement
The RRSP value is in tax deferral — contributing in high-income working years and withdrawing in lower-income retirement years. However, a large RRSP balance converted to a RRIF can create significant tax burden later, particularly when minimum withdrawals increase.
Related Resources
This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP professional.