RRSP
How Does an RRSP Work?
A simple guide to understanding Registered Retirement Savings Plans in Canada.
Start here
RRSP in 30 seconds
An RRSP is a registered account designed primarily for retirement savings. Eligible contributions may create a tax deduction. Investment income generally grows tax-deferred while it stays inside the plan, and normal withdrawals are generally included in taxable income.
The key idea
An RRSP is a container—not an investment
“RRSP” describes the registered account and its tax treatment. The savings or qualified investments held inside determine the account’s returns and risk.
Not every security or asset qualifies, and an issuer may offer a narrower range than the tax rules permit.
Your RRSP
The registered container
Examples only. Confirm that a specific holding is qualified and offered by your issuer. See the CRA qualified-investment rules.
The basic process
How an RRSP works
- 1
You earn RRSP contribution room
New room is generally linked to prior-year earned income, subject to a dollar ceiling and CRA adjustments.
- 2
You contribute to an RRSP
Contributions use available room. Your own RRSP and eligible spousal RRSP contributions share your personal limit.
- 3
You may claim an RRSP deduction
An eligible deduction may reduce taxable income. You may be able to leave a contribution undeducted and claim it in a later year.
- 4
You generally pay tax when money is withdrawn
Normal withdrawals are generally reported as income, and tax may be withheld when the money leaves the plan.
Know your limit
How RRSP contribution room works
CRA calculates each person’s RRSP deduction limit. New room is generally based on the lesser of 18% of prior-year earned income and the annual dollar ceiling, with adjustments that can include pension adjustments, past-service pension adjustments, pension-adjustment reversals, and unused room.
Generally begins with
2026 RRSP dollar limit
$33,810
This does not mean everyone can contribute $33,810.
Your actual RRSP contribution and deduction room is individual. Check the RRSP Deduction Limit Statement on your latest Notice of Assessment, Form T1028 where applicable, or CRA My Account.
Do not calculate personal room from the ceiling alone. Review the CRA definition of RRSP deduction limit and your own CRA records.
Room can carry forward
What happens to unused room?
Unused RRSP deduction room generally carries forward. You do not need to use all available room in the year it first becomes available.
Unused contributions and unused deduction room are related but distinct CRA concepts. Always use your own statement rather than a generic lifetime maximum.
Simple illustration
Simplified example
What does an RRSP deduction do?
Alex’s simplified illustration
Income
$80,000
Eligible deduction claimed
$5,000
Simplified taxable income
$75,000
The purpose
Why people use RRSPs
Potential tax deduction
Eligible RRSP deductions may reduce taxable income.
Tax-deferred growth
Investment income generally is not taxed annually while it remains inside the RRSP.
Retirement saving
RRSPs are primarily designed to help Canadians save for retirement.
Taking money out
What happens when you withdraw from an RRSP?
For a normal RRSP withdrawal, the financial institution generally withholds tax and issues a tax slip. You generally report the withdrawal as income for that year. The amount withheld is a prepayment—not necessarily your final tax liability.
The tax withheld may be less or more than the final tax produced by your full return. See CRA withdrawal-tax guidance.
A key difference
Withdrawal room: RRSP vs. TFSA
TFSA
Withdraw $10,000
You generally receive $10,000 of new contribution room the following calendar year.
RRSP
Normal $10,000 withdrawal
It generally does not restore $10,000 of RRSP contribution room.
Side by side
RRSP vs. TFSA
| Feature | RRSP | TFSA |
|---|---|---|
| Contribution deduction | Eligible contributions may be deductible | No contribution deduction |
| Growth while inside | Generally tax-deferred | Generally tax-free in Canada |
| Normal withdrawals | Generally taxable | Generally tax-free |
| Withdrawal restores room | Generally no | Generally added back the following calendar year |
| Primary purpose | Primarily retirement saving | Flexible saving and investing |
Special programs
Can you use RRSP money before retirement?
Yes, but normal withdrawals are generally taxable. Two specific programs have separate eligibility, withdrawal, and repayment rules.
Home Buyers’ Plan (HBP)
Eligible participants may currently withdraw up to $60,000 from their RRSPs to buy or build a qualifying home. Eligibility conditions apply, and amounts generally must be repaid over a period of up to 15 years. A qualifying HBP withdrawal is treated differently from a normal taxable withdrawal.
Lifelong Learning Plan (LLP)
Qualifying participants may withdraw up to $10,000 in a calendar year, up to $20,000 in a participation period, for eligible education or training for themselves or a spouse or common-law partner. Repayment is generally spread over 10 years, with timing rules and eligibility conditions.
RRSP maturity
What happens to an RRSP at age 71?
An RRSP must mature by the end of the year in which the annuitant turns 71. Depending on the rules and the person’s circumstances, funds may be transferred directly to a RRIF, used to purchase an eligible annuity, or withdrawn. Cash withdrawals are generally taxable.
Review CRA maturity guidance. RRIF Basics — Coming Soon.
Another account type
What is a spousal RRSP?
A person may make eligible contributions to an RRSP whose annuitant is their spouse or common-law partner. The contribution uses the contributor’s available RRSP deduction room—not the annuitant’s—and specific attribution rules can affect who reports later withdrawals.
The timing of contributions and withdrawals matters. This is a general introduction, not a tax-planning recommendation. See CRA spousal RRSP withdrawal rules.
Contribution caution
Be careful not to over-contribute
Generally, unused RRSP, PRPP, and SPP contributions that exceed your RRSP deduction limit by more than $2,000 may be subject to a 1% monthly tax while the excess remains. Eligibility for the $2,000 amount and other exceptions matter.
The $2,000 amount is not extra deductible contribution room and should not be treated as permission or a recommendation to deliberately over-contribute. Rely on your actual CRA RRSP deduction limit and review the CRA excess-contribution rules.
The essentials
5 RRSP rules worth remembering
- 01
Your contribution room is personal.
The annual ceiling is not your individual limit.
- 02
Eligible deductions may reduce taxable income.
The tax impact depends on your full circumstances.
- 03
Growth is generally tax-deferred.
It is not permanently tax-free.
- 04
Normal withdrawals are generally taxable.
They usually do not restore contribution room.
- 05
Over-contributions may create tax consequences.
Use your actual CRA limit before contributing.
Quick knowledge check
3 questions to lock it in
Your answers stay in this browser session and are not saved or submitted.
Key takeaways
What you should remember
- Eligible RRSP contributions may create a tax deduction.
- Investment income generally grows tax-deferred while it remains inside the RRSP.
- Normal withdrawals are generally taxable.
- Your RRSP contribution and deduction limit is individual.
- Special programs such as the HBP and LLP have separate eligibility and repayment rules.
Related topics
Keep learning
Available
How Does a TFSA Work?
Read articleComing Soon
TFSA vs RRSP
Coming Soon
Home Buyers’ Plan
Coming Soon
RRIF Basics
Sources & last reviewed
Official references
- Last reviewed
- August 2026
- Primary source
- Canada Revenue Agency / Government of Canada