Registered Retirement Savings Plans, or RRSPs, aren’t rocket science, but the more you know about them, the better.
We chatted with Samarth “Sam” Sunil Nadig, Wealth Advisor for Cambrian and Aviso Wealth, about five of the basics of RRSPs. (If you want to start from square one, check out this article, also featuring Sam!)
A Registered Retirement Savings Plan, or RRSP, is a savings program where you contribute money for retirement. When you retire, that account turns into an RRIF (Registered Retirement Income Fund), from which you withdraw the funds you need to live.
Sam says an RRSP is analogous to a kitchen cabinet.
“Your RRSP is a cabinet where you store the ingredients (investment products) you’ve chosen to help you reach your goal,” says Sam. “These ingredients are sheltered from the chaos of your kitchen—things like current expenses, or a potential high-income tax rate. When the time comes, you can take what you’ve stored on those shelves and use it to cook up your retirement!”
When you contribute to an RRSP, you receive a tax receipt. When you file your taxes, your income is reduced by the amount you contributed.
For example, if you earned $70,000 and contributed $8,000 one year, the CRA would calculate your tax based on $62,000 instead of $70,000. Since you would have already paid taxes through payroll as if you earned $70,000, you would get the difference back.
Withdrawals work the opposite way: they increase your income, so you pay more tax. Read more about withdrawals below in point #5!
The contribution room for your RRSP is 18 per cent of your income from the previous year, capped at a maximum. For 2025, the limit is $32,490. The CRA determines the limits, and you can check them on the Government of Canada website.
For 2025 contributions, the deadline is March 2, 2026. It’s 60 calendar days from the end of the previous year. March 1 is on a weekend, so the deadline was moved to the next business day (Monday, March 2).
“The best day to start is today,” says Sam.
The earlier you start, the more your contributions grow. And remember, it’s important to invest the money!
“A big misconception is that an RRSP itself is an investment,” says Sam. “It isn’t, it’s an account. You still need to invest in it.”
“Starting earlier helps you reach your goals by contributing more than if you waited five to 10 years,” he adds. “Growth compounds, and the earlier you begin, the easier it is. There’s also the discipline factor. Building the habit early helps when life gets more expensive later.”
You can open an RRSP as soon as you’ve filed your first tax return and have contribution room. That could be as early as age 16, if you start your first job when you’re 15.
When you retire, you convert your RRSP into a RRIF and withdraw gradually.
You can withdraw at other times too, but remember: early withdrawals are not ideal because they will negatively affect compounding, and you will end up with less than you might expect.
Though, sometimes, if you need the funds, withdrawals could be necessary.
“If you’re not working for a year, for example, taking a sabbatical,” says Sam, “that might be an okay time to withdraw because your tax bracket is lower.”
Exceptions for taxes on withdrawals are the Home Buyer’s Plan (HBP) and the Lifelong Learning Plan. In those cases, you can withdraw funds from an RRSP without paying tax if you repay them over time.
Read more about HBPs here, and about the Lifelong Learning Plan here.
“There’s no limit on how many RRSPs you can have,” says Sam. “Even if you already have one elsewhere, we can open a new one. We just need your SIN and ID.”
You can open an RRSP at any Cambrian branch, or if you're investing long-term, Wealth Solutions can help. Call, email, or book an appointment online!
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc.
We would be happy to discuss your unique situation with you.
Our goal is to make complex topics like this one, simple.
