What is a Registered Retirement Savings Plan (RRSP)?

A Registered Retirement Savings Plan (RRSP) is a Canadian account that gives you a tax deduction for contributing and taxes the money when you take it out. Investments inside grow without annual tax on interest, dividends, or capital gains, and the entire withdrawal is taxed as ordinary income at whatever rate applies in the year you withdraw.

The account is a bet on tax rates. You deduct at today’s marginal rate and pay at your future one, so the RRSP works best for people contributing in a high-income year and withdrawing in a lower-income one. Claiming the deduction in a year when your income is unusually low gets less value from the room, though you can contribute that year and save the deduction for a higher-income year.

RRSP Contribution Limit for 2026

Your deduction limit for 2026 is 18% of your 2025 earned income, capped at the annual dollar limit of $33,810. Reaching the cap requires about $187,800 of earned income in 2025.

Unused room carries forward indefinitely, so your actual limit is this year’s calculation plus everything you never used, minus any pension adjustment reported by an employer plan. The exact figure appears on your latest notice of assessment under the RRSP deduction limit line, and in CRA My Account.

A pension adjustment comes from benefits earned in a registered pension plan or contributions made through a deferred profit sharing plan, and it reduces your RRSP room for the following year, which is why members of generous defined benefit plans often have very little RRSP space. A group RRSP on its own does not create a pension adjustment.

You are allowed a cumulative $2,000 cushion above your limit without penalty. Beyond that, over-contributions are taxed at 1% per month until withdrawn.

RRSP Deadline for the 2026 Tax Year

Contributions count toward a tax year if they are made during that calendar year or in the first 60 days of the next one. For the 2026 tax year, the deadline is March 1, 2027. The deadline that fell during 2026, March 2, 2026, applied to the 2025 tax year.

The first-60-days window lets you calculate your 2026 income, see what bracket you landed in, and decide how large a deduction is worth buying. You can also contribute now and carry the deduction forward to claim in a later, higher-income year, which can pay off if you expect a raise or a bonus year ahead.

RRSP Withdrawal Rules and Withholding Tax

You can withdraw from an RRSP at any age, but withdrawals are fully taxable as income and your financial institution withholds tax immediately.

Outside Quebec, the withholding rates are:

Quebec residents face lower federal withholding plus a separate provincial amount. In every case, withholding is a prepayment rather than the final bill. The withdrawal is added to your income for the year and settled at your actual marginal rate when you file, so a large withdrawal by someone already in a high bracket typically owes more in April.

Two further costs make early withdrawals expensive beyond the tax. The contribution room you used is gone permanently, unlike a TFSA where room returns the following year. And the withdrawal counts as income for the year, which can reduce income-tested benefits.

Home Buyers’ Plan and Lifelong Learning Plan

Two programs let you withdraw without immediate tax. The Home Buyers’ Plan allows an eligible buyer to take up to $60,000 toward a qualifying home, repayable to the RRSP over 15 years. Under the temporary relief for first HBP withdrawals made from 2026 through 2028, repayment begins in the fifth year after the withdrawal year; a first withdrawal in 2026 therefore has a first repayment year of 2031. The Lifelong Learning Plan allows up to $10,000 a year, to a $20,000 total, for full-time education, repayable over 10 years.

Both are loans from yourself. Miss a scheduled repayment and the shortfall is added to your taxable income for that year.

What Happens at Age 71

An RRSP cannot be held past December 31 of the year you turn 71. By then you must convert it, and there are three options: transfer to a Registered Retirement Income Fund (RRIF), buy an annuity, or withdraw the balance outright, which means taxing the whole amount in one year and is rarely sensible.

A RRIF is the usual choice. It keeps the investments sheltered but requires a minimum withdrawal each year, calculated as a percentage of the balance that rises with age. Those mandatory withdrawals are taxable income whether you need the money or not, and for people with large RRSPs they can push income high enough to trigger an Old Age Security (OAS) clawback.

This is the reasoning behind drawing an RRSP down earlier than required, sometimes called an RRSP meltdown: taking deliberate withdrawals in lower-income years between retirement and 71 to avoid a larger forced withdrawal later. Whether it helps depends on your bracket in each year, your other income sources, and the size of the eventual RRIF minimum, which is the kind of comparison that needs a multi-year projection rather than a single-year calculation. You can model a meltdown alongside RRIF conversion, Canada Pension Plan (CPP), and OAS in ProjectionLab’s Canadian retirement planner.

Spousal RRSPs

A spousal RRSP is contributed to by the higher earner and owned by the lower-earning spouse. The contributor claims the deduction and the funds count against the contributor’s room, but the account and its future withdrawals belong to the spouse.

The point is to even out retirement income between two people so that each draws at a lower bracket rather than one drawing at a high one. An attribution rule limits gaming it: withdrawals can be attributed back to the contributor when a contribution was made in the withdrawal year or either of the two preceding calendar years.

Pension income splitting has reduced how essential spousal RRSPs are, but they remain useful for couples with very unequal income, particularly before age 65 when splitting options are narrower.

Frequently Asked Questions

What is the RRSP contribution limit for 2026? 18% of your 2025 earned income up to $33,810, plus any unused room carried forward, minus any pension adjustment. Your notice of assessment shows your personal figure.

When is the RRSP deadline for the 2026 tax year? March 1, 2027. The deadline that fell in 2026 was March 2, 2026, for 2025 contributions. Contributions made in the first 60 days of 2027 can be deducted for 2026 or carried forward to a later year.

How much tax do I pay on an RRSP withdrawal? Tax is withheld at 10%, 20%, or 30% depending on the amount, with different rates in Quebec. That is only a prepayment. The withdrawal is added to your annual income and taxed at your marginal rate when you file.

Should I contribute to an RRSP or a TFSA? Compare your marginal rate now against the rate you expect when withdrawing. A deduction claimed at 45% and withdrawn at 25% is a clear gain, which favours the RRSP for high earners. At a low current income the deduction is worth little and the TFSA usually wins, partly because TFSA withdrawals do not trigger clawbacks of income-tested benefits.

What is the difference between an RSP and an RRSP? Nothing meaningful. RSP is an informal abbreviation some institutions use in product names. The registered plan defined in the Income Tax Act is the RRSP.

Can I withdraw from my RRSP before retirement? Yes, at any age, but the withdrawal is taxable, tax is withheld up front, and the contribution room is lost permanently. The Home Buyers’ Plan and Lifelong Learning Plan are the exceptions, and both require repayment.

What happens to my RRSP when I turn 71? It must be converted by December 31 of that year, normally into a RRIF, which then requires an age-based minimum withdrawal every year. Those withdrawals are taxable income.