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Financial Consumer Agency of Canada

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Registered Retirement Savings Plans

An RRSP is a government-sponsored savings plan designed to encourage Canadians to save for their retirement by offering attractive tax benefits that allow your savings to grow much faster than they otherwise would. The tax benefits of RRSPs come in two forms:

  1. The contributions you make to your RRSP are tax-deductible. For example, if you contribute $1,000 to your RRSP in 2011, you can deduct $1,000 from your taxable income when filing your taxes, and you could receive a tax refund. You could then re-invest your tax refund in your RRSP.
  2. The money in your RRSP grows and compounds tax-free until you withdraw it.

You can hold a variety of savings and investment types in an RRSP, such as mutual funds, Guaranteed Investment Certificates, bonds, equities and many more. To find out more, speak to a financial planner or advisor.

Types of RRSPs

There are four basic types of RRSPs:

Type of RRSP Description For more information
Basic (Individual) RRSP
  • The plan is set up in the name of the person making contributions. Only that person can make contributions and withdrawals.
  • You can set up an RRSP through a financial institution such as a bank, credit union, trust or insurance company.
 Canada Revenue Agency – Registered Retirement Savings Plan
Spousal or common law partner RRSP
  • You can contribute to an RRSP in your spouse’s or common-law partner’s name. You have to have the contribution room available.
  • You and your spouse or common-law partner can split your RRSP income, lowering the amount of tax you will pay.
 For more detailed information on income splitting, visit the Canada Revenue Agency website.
Group RRSP
  • Some employers offer group RRSP plans to their employees.
  • Individuals have their own RRSPs, but they are managed by a third party.
  • Your contributions usually come out of your pay. Employers might also contribute.
  • Before joining a group plan, be sure you fully understand how it works—e.g. what you can invest in, fees, restrictions etc....
  
Self-directed RRSP
  • You can build and manage your own portfolio of investments.
  • You need to feel confident enough to manage your investments on your own.
  • Available at brokerage firms.
 Canada Revenue Agency – Self-directed RRSPs

Setting up an RRSP

You can set up an RRSP (with the exception of group RRSPs) through a financial institution such as a bank, credit union, trust or insurance company.

If you are considering opening an RRSP with a federally regulated financial institution, you have the right to be informed about key details before the plan is set up. See Your right to information: registered plans (RRSPs, RESPs, TFSAs, RDSPs, RRIFs).

Contributing to an RRSP

The maximum amount you can contribute to an RRSP depends on your income and how much you contributed in previous years. It is called your deduction limit. You are allowed to contribute 18 percent of your previous year’s income, up to a maximum amount. For 2013, the maximum deduction limit was $23,820.00. However, if you didn’t contribute the maximum in previous years, your deduction limit will be higher. If you contribute to a pension plan at work, your deduction limit will be lower.

After you file your tax return, you’ll receive a Notice of Assessment from the Canada Revenue Agency (CRA), which will indicate your new RRSP deduction limit. For more information on contribution limits and how the CRA determines your deduction limit, visit the CRA website.

Important dates to remember

Ideally, you want to contribute to your RRSPs as early as possible to maximize the amount of time your savings can grow and compound.

March 1 of the current year is the deadline for contributing to an RRSP for the previous tax year.

December 31 of the year you turn 71 years of age is the last day you can contribute to your own RRSP.

Withdrawing money from an RRSP

You can withdraw money from your RRSPs at any time but you will have to pay taxes on what you withdraw. RRSPs are a long-term savings tool designed to help you save for retirement. Unless you have no other options available, you should not withdraw from your RRSP until retirement.

There are two exceptions where you can withdraw from your RRSP tax-free. They are:

  1. The Home Buyers Plan (HBP)—With the HBP, you can borrow up to $25,000.00 (and an additional $25,000.00 from a spousal RRSP), tax-free, from your RRSP for a down payment on your first home. Remember, you have to re-contribute the money within 15 years. See Buying your first home for more information on the HBP.
  2. Lifelong Learning Plan (LLP)—The LLP lets you borrow money from your RRSP to help you pay for education or training for you, or your spouse or common-law partner. However, you cannot use the borrowed money to pay for the education of your children, or your spouse or common-law partner’s children. For more detailed information on the Lifelong Learning Plan, visit the Canada Revenue Agency website.

For more information on ways to help you save for your children’s education, see our tip sheet on Registered Education Savings Plans.

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Date Modified:
2013-03-06