Your RRSP Projection
Total Contributions:
$0
Investment Growth:
$0
Total Tax Refunds:
$0
Available Room (2026):
$0
After-Tax Retirement Value:
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Net Tax Benefit:
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RRSP Growth to Retirement
RRSP vs TFSA vs Non-Registered
How RRSPs Save You Money
Registered Retirement Savings Plans are built around one simple concept: save taxes now, pay later. Every dollar you contribute reduces your taxable income today. If you're in a 30% tax bracket and contribute $10,000, you save $3,000 on your tax bill. That's money back in your pocket right away.
Inside your RRSP, investments grow without being taxed yearly. If your stocks pay dividends or you sell for a gain, there's no immediate tax hit. Everything compounds tax-free until you withdraw it, ideally in retirement when you're in a lower tax bracket. That's when you finally pay tax, but often at 10-15% less than your working years rate.
The math gets really interesting over time. That $10,000 contribution? Not only did it save you $3,000 in taxes, but if it grows to $30,000 over 20 years, all that growth happened without any tax drag. In a non-registered account, you'd be paying tax on dividends and capital gains along the way, which slows down your compounding.
Understanding Your Contribution Room
RRSP contribution room is calculated as 18% of your previous year's earned income, up to an annual maximum ($31,560 for 2026). If you earned $100,000 last year, you can contribute $18,000 this year. Earn $50,000? Your room is $9,000. The key word is "earned" - investment income doesn't count.
If you don't use your room, it carries forward forever. Miss contributions for five years? That room is still there waiting. This is hugely valuable for people starting careers or dealing with tight budgets early on. Once you're earning more, you can catch up with those accumulated contribution amounts.
One catch: if you have a pension plan at work, it reduces your RRSP room through something called a Pension Adjustment. The idea is to keep retirement savings balanced whether you have a pension or not. Your T4 will show your pension adjustment if it applies to you. Check your Notice of Assessment from CRA to see your exact available room.
RRSP Withdrawal Strategies
Taking money out of your RRSP before retirement usually isn't smart, but life happens. Early withdrawals are taxed as regular income and you lose that contribution room forever - it doesn't come back like TFSA room does.
There are two exceptions worth knowing. The Home Buyers' Plan lets first-time buyers withdraw up to $35,000 tax-free for a down payment. You have 15 years to pay it back to your RRSP. The Lifelong Learning Plan allows withdrawals for education, also with mandatory repayment. Both can be strategic moves if you need the money for these specific purposes.
At 71, your RRSP party ends. You must convert it to a RRIF (Registered Retirement Income Fund) or buy an annuity. RRIFs require minimum annual withdrawals based on your age, starting small and increasing over time. The government wants their tax revenue eventually, and this forces you to start taking it out and paying taxes.
Spousal RRSPs and Income Splitting
Here's a strategy many couples miss. The higher-earning spouse can contribute to a spousal RRSP, getting the tax deduction at their higher rate, but the money is withdrawn in the lower-earning spouse's name in retirement at their lower tax rate. This pension income splitting can save thousands annually.
The three-year rule prevents gaming the system - withdrawals are attributed back to the contributor if made within three calendar years of contribution. But for long-term retirement planning, spousal RRSPs are one of the best legitimate tax reduction strategies available to Canadian couples.
Even if both spouses earn similar incomes now, career breaks, parental leave, or part-time work can create future income differences. Starting a spousal RRSP early gives you flexibility down the road for tax-efficient retirement income.
Frequently Asked Questions
Should I prioritize RRSP or paying off my mortgage?
It depends on your numbers. If your mortgage rate is 5% and investing would likely return 6-7%, RRSPs win mathematically, especially with the immediate tax refund. But there's emotional value in being mortgage-free. Many people split the difference: contribute enough to RRSP to get employer match, put the tax refund toward the mortgage, then decide what to do with remaining cashflow.
Can I contribute to both RRSP and TFSA?
Yes, and you should if possible. They serve different purposes and complement each other beautifully. RRSP gives you today's tax break and is great for high earners. TFSA gives you flexibility and future tax-free income. Ideal strategy: max employer RRSP matching, max your TFSA, then add more RRSP room if you have money left over.
What happens to my RRSP if I die?
RRSPs can transfer tax-free to a surviving spouse's RRSP. If you leave it to children or other beneficiaries, the entire amount is taxed as income in your final tax return - potentially at 50%+. Life insurance is sometimes used to cover this tax bill so beneficiaries get the full amount. Talk to a financial advisor about beneficiary designations and estate planning.
I'm 25. Should I even bother with RRSPs or just use my TFSA?
At 25, you're probably in a lower tax bracket than you will be later. TFSA contributions make more sense now - pay the lower tax rate today and never pay tax again. Once you're earning $70,000+, RRSPs become more attractive. Exception: if your employer matches RRSP contributions, always contribute enough to get that match regardless of your age or tax bracket.
Can I have more than one RRSP account?
Absolutely. You might have one through your employer, one at your bank for mutual funds, and another at a discount brokerage for self-directed investing. Your contribution limit is shared across all accounts though. This multi-account approach gives you flexibility to choose the best investments and fees for each portion of your retirement savings.