RRSPs: Know your limits

What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is an investment account that helps you save for your retirement. The income earned on your investments within the account is not taxable and there are other tax advantages, as well. But you need to know the rules to get the most mileage out of RRSPs and avoid tax penalties.

RRSP contribution limit

• The total amount you can contribute to your RRSP each year is made up of your contribution limit for the current year plus any "carry-forward" contribution room from previous years. You can over-contribute by up to $2,000 cumulatively without penalty.
• Your RRSP contribution limit for 2026 is 18% of the “earned income” that you reported on your tax return in the previous year, up to a maximum of $33,810. For 2025, the limit was $32,490. If you have a company pension plan, your RRSP contribution limit is reduced – see the last bullet point below for details.
• If you don't make the maximum allowable RRSP contribution limit in any given year, the difference between it and the amount you contributed is carried forward. This amount can be contributed in a future year.

Do you have an employer-sponsored pension plan?

If so, your RRSP contribution limit is reduced by your “pension adjustment.” The pension adjustment is calculated by your employer and reported to CRA on your T4 each year. If you're a member of a defined contribution (DC) pension plan or defined profit sharing plan (DPSP), your pension adjustment is the total contributions to the plan made by you and your employer. If you’re a member of a defined benefit (DB) plan, your pension adjustment is determined by a formula designed to reflect the pension benefit entitlement you earned in the year. For more information, see the CRA website.

What is the age limit to contribute?

You can contribute to your RRSP up to December 31 of the year you turn 71. You must convert to a Registered Retirement Income Fund (RRIF) after that or purchase an annuity to avoid having the value of your RRSP fully taxed in the year.*

What can I do with an RRSP?

An RRSP is a simple way to save for retirement and pay less income tax. There are also other useful things you can do with your RRSP, including:

• Making a down payment on a home through the Home Buyers' Plan
• Funding educational costs through the Lifelong Learning Plan

What are the main benefits of an RRSP?

1. Tax-deferred investment growth: You don’t pay tax on investment earnings within the RRSP until funds are withdrawn (usually in retirement). This tax-deferred compounding can allow your retirement assets to grow faster.
2. Tax-deductible contributions: When you make an RRSP contribution (within your contribution limits), you receive a deduction against net income on your tax return. Ideally, your marginal tax rate when you withdraw money out of the RRSP in retirement is lower than your tax rate when you made the contribution.
3. Income-splitting opportunities: Once you convert your RRSP to a RRIF, income payments are eligible for pension income splitting (if at age 65 or age 65 and older).