Lesson RRSPs 101

What is an RRSP?

Learn about Registered Retirement Savings Plans (RRSPs).

Mature couple relaxing with tablet and phone

An RRSP is an account created by the Canadian government to help Canadians save for retirement.

As a registered account, RRSPs have rules and regulations around: contributing to an RRSP, how much you can contribute, what investments an RRSP can hold, and withdrawing money from your RRSP.

What are the tax-benefits of an RRSP?

  • Tax-deductible contributions: commonly thought of as a way to get tax-refunds.

    These are a mainstay of RRSPs and part of the reason why they’re so popular.
    When you make a deposit into your RRSP, the amount comes off your taxable income for the year, and you could receive money back from the government at tax time.

  • Example, if you earned $65,000 last year and you contributed $7,000 to your RRSP, you would only pay taxes as if you earned $58,000.

    This can result in a much-appreciated tax return at the end of the tax season.

  • Tax-sheltered earnings: the investments in your RRSP grow tax-free.

    So you benefit from years of compound growth without having the tax-man reaching in while it’s in the account.
    However, when you retire you will have to pay taxes on the money you withdraw.

  • Tax deferral

    When you’re retired you could be earning little to no income, so when you withdraw money from your RRSPs, they will typically be taxed in a lower tax bracket than they would’ve been in your working years.

What to know about RRSP contributions

  • Because of the tax benefits, the government limits the amount you can put into your RRSP.

    You can deposit 18% of your earned income from the previous year
    (Up to a maximum of $30,780 for 2023).

  • Any leftover room from previous years will carry over indefinitely until you use it.

What to know about withdrawals

  • An RRSP must be converted to a Registered Retirement Income Fund (RRIF) in the year you turn 71.

     (Can also be converted ahead of time)

  • Once converted to a RRIF, minimum payment withdrawals are not taxed.

    Payments above the minimum however are subject to withholding taxes.

  • If you make a withdrawal from your RRSP, you will have to pay a withholding tax on the amount you withdraw.

    (Except in special circumstances such as the Home Buyers' Plan outlined below the withholding tax table):

Amount withdrawnTax withheldTax withheld (Quebec)
$0 - $5,00010%19% (5%¹ + 14%²)
$5,000.01 - $15,00020%24% (10%¹ + 14%²)
$15,000.01 +30%29% (15%¹ + 14%²)

Withholding taxes for Quebec residents include both the CRA and Revenu Quebec withholding amounts combined.

¹Represents the CRA withholding amount. ²Represents the Revenu Quebec withholding amount.

The tax withheld may not always be enough to account for the tax you owe for your tax bracket. You may be asked to pay more on the withdrawal when you include the withdrawal on your income tax and benefit return for that year.

Extra benefits of an RRSP

  • The Home Buyers’ Plan (HBP) allows you to withdraw up to $60,000 from your RRSP tax-free to pay for a home.

    (Subject to certain conditions, learn more about the HBP in this article.)

  • The Lifelong Learning Plan (LLP) allows you to withdraw up to $20,000 ($10,000 per calendar year) from your RRSP tax-free to pay for their own education.

    (Subject to certain conditions, learn more about the LLP in this article.)

Investments you can hold in an RRSP

While some think an RRSP is simply a savings account, RRSPs are an incredibly versatile investment account.

You can build and diversify a portfolio by investing in RRSP-eligible investment products:

  • Stocks (Canadian, U.S. and International)
  • ETFs
  • Options
  • Mutual funds
  • Bonds
  • Gold and silver
  • GICs
  • Cash

For a detailed list of investment products available, explore our article or infographic.

To view a full list of qualified investments available in an RRSP, please explore the CRA's page.

Benefits of a Questrade RRSP

  • No annual account fees. No opening fees.
  • Hold both Canadian and U.S. dollars or investments in the account at the same time.
  • Open the account in minutes.
  • Contribute to your RRSP quickly and easily online.

    No need to book an appointment or wait in line.

Start investing confidently

Ready to open an account and take charge of your financial future? It's easy. Get started in minutes.

Open an account

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.

Related lessons

Want to dive deeper?

Read next

Explore

Have more questions?

Tell us what you need help with, and we’ll get you in touch with the right specialist.