Last updated: December 22, 2022 | Reviewed by Stuart Dollar

What is an RRSP? 

A registered retirement savings plan (RRSP) is a type of savings account specially designed to help Canadians save for their retirement.

It comes with tax advantages that let you save and grow your money now, while deducting your RRSP contributions from your current tax bill. 

When it’s time to take your money out, you’ll pay taxes on the withdrawal amount, but likely at a much lower rate than what you’d pay today.  

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How does an RRSP work?

You can open an RRSP at any financial institution and use it to hold a variety of investments, such as:

With RRSPs, you won’t have to pay taxes on any investments growing in the account – at least, not until you start withdrawing funds from it. Plus, your contributions are tax deductible. This means that you can use your contributions to lower your current taxable income.

You can contribute to your RRSP at any time until you reach December 31 of the year in which you turn 71. This is provided you have contribution room available. However, if you want to use your RRSP contributions to reduce your tax bill, you’ll have to ensure you make all your contributions by a specific deadline.

When you’re ready to take your money out of your RRSP, you’ll pay taxes on the withdrawal amount, but likely at a lower rate than what you’d pay today. For many Canadians, withdrawing from your RRSP at a later point in life – in your 60s or 70s – means paying much less tax.

As an example, let’s say you’re planning on retiring at age 65. At this point, you’ll likely earn less income than you would during your working years, which puts in you a much lower tax bracket. So, you’ll be paying less tax when you withdraw from your RRSP at that age, all the while helping to lower your current tax bill. 

Benefits of an RRSP

RRSP contributions and withdrawals

RRSP contributions

You’re allowed to contribute up to 18% of your previous year's earned income, up to a maximum amount set each year by the Income Tax Act and Regulations. You can also carry forward any unused contribution room from previous years Please note that your contribution limit for the current year will be reduced by any pension adjustment amounts. Connect with a Sun Life advisor for more information.

RRSP contribution limits FAQs

RRSP withdrawals and taxes

RRSPs offer tax-deferred savings. This means you won’t have to pay tax on your investments and any income earned on those investments until you start withdrawing funds.

RRSP withdrawal rules and taxes FAQs

Make the most of your RRSP

Open an RRSP

Our advisors are ready to help you open an RRSP and start saving for the future. They can also answer any questions you may have. 

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Available self-serve features depend on your account, contract or policy.

Other types of RRSPs

Apart from individual RRSPs, which you can set up in your own name, there are two additional types of RRSPs you’ll come across: spousal RRSPs and group RRSPs. But regardless of what type of RRSPs you have and how many you have, you’re still responsible for staying within your contribution limit.

Spousal RRSPs

 

A spousal RRSP lets you contribute and save money for your spouse or common-law partner. You contribute, up to your contribution limit, but your spouse or common law partner owns the RRSP, not you.

 

Spousal RRSP FAQs

Group RRSPs

 

A group RRSP is a savings plan offered through an employer where you can contribute directly from your paycheque. In some cases, you can also receive matching contributions from your employer.

 

Group RRSP FAQs

Other than retirement, what else can you use an RRSP for?

RRSPs are ideal for retirement savings, but they also come with other benefits that can help you right now. Here are two ways you can borrow from your RRSP to help pay for a new home or schooling:

Home Buyers’ Plan (HBP)

 

The HBP lets you withdraw up to $35,000 from your RRSP to buy or build your first home in Canada – either for yourself or a relative with a disability.
 

Home Buyers’ Plan FAQs

Lifelong Learning Plan (LLP)

 

The LLP lets you withdraw up to $10,000 per year (up to a maximum of $20,000) from your RRSP for you, your spouse or your common-law partner. You can use the funds for full-time education or a training program.

 

Lifelong Learning Plan FAQs

More RRSP FAQs

 

At what age can you start contributing to an RRSP?

Under the Income Tax Act, there’s no minimum age for owning an RRSP. Some financial institutions allow a minor to open an RRSP with parental consent; others don’t. However, a minor or adult can contribute to an RRSP only if they have available contribution room. In general, you get contribution room from earning income in the previous year. And, you must be at least age 19 to benefit from the right to overcontribute by $2,000 without penalty.

What’s more, even though there's no minimum age set for having an RRSP, provincial law have age requirements for owning property. For example, in Québec, a minor can own property, but the property would be managed by the child’s parents or legal tutor(s). 

Connect with an advisor for more detailed information

At what age can you withdraw money from an RRSP?

You can withdraw money from your RRSP at any time. But please note that you can’t own an RRSP past the end of the year you turn age 71. It’s also important to note that your withdrawals are subject to a withholding tax, which is the amount that’s sent to the CRA (and Revenu Québec, if you’re a Québec resident) when you make an RRSP withdrawal. The amount of tax that’s withheld depends on how much you withdrew and where you live. 

Get more answers to questions about RRSP withdrawal rules and taxes

 

At what age do you have to stop contributing to an RRSP?

December 31 of the year you turn 71 years old is the last day that you can contribute to any RRSP that you own. After that day, you can no longer own an RRSP, much less contribute to one. However, you may contribute to your spouse or common law partner’s spousal RRSP if they’re a year or more younger than you, until the end of the year they turn age 71 (this is provided you have available RRSP contribution room). 

Get more answers to questions about RRSP contributions

 

At what age do you have to convert your RRSP?

After the end of the year you turn age 71, you can no longer own an RRSP. Before this happens, you can choose any or all of these options:

Connect with an advisor to find out which options are best for you

1Withholding tax is not applied on amounts that are used to purchase an annuity.

2Please note that if you choose to withdraw funds from your RRSP, the withdrawn amount will be subject to withholding tax.

Learn more about RRSP withdrawal rules and taxes 

 

What can you do with an RRSP when you retire?

When you retire, you can use funds from your RRSP for any purpose, including:

  • general living expenses,
  • paying medical or health-related costs (e.g. prescription drugs, health insurance, etc.),
  • travel and vacation, and
  • any hobbies you may take up.

 

What happens to an RRSP when you turn age 71?

You can no longer own an RRSP after December 31 of the year you turn 71. At this point, you can choose any or all of these options:

If you don’t make a decision by the end of the year you turn 71, a default choice may be selected for you. And it may not be what you would have chosen. Connect with an advisor to find out which options are right for you.

1 Withholding tax is not applied on amounts that are used to purchase an annuity.

2 Please note that if you choose to withdraw funds from your RRSP, the withdrawn amount will be subject to withholding tax.

When should you open an RRSP?

There’s no minimum age required to open an RRSP. You can open an RRSP if you have contribution room. Generally, you start accumulating contribution room the year after you first start earning income. However, even though there's no minimum age for owning an RRSP, provincial law imposes age requirements for owning property. Financial institutions may also impose age requirements for owning financial products. 

Connect with an advisor for more detailed information

What’s a locked-in RRSP?

A locked-in RRSP is also known as a locked-in retirement account (LIRA). A LIRA is a type of RRSP that holds money from your former employer’s pension plan. Investments within the LIRA grow tax-deferred – so you don’t have to pay tax until you make withdrawals. But unlike a regular RRSP, the amounts in a LIRA are “locked-in,” which means you generally can't take any withdrawals until you reach a specific age (usually age 55).

Learn more about how LIRAs work

What happens to your RRSP when you retire?

It depends on how old you are when you retire. You can retire at any age. So if you retire in your 50s or 60s or even sooner, then you can continue to contribute to your RRSP provided you still have a source of income and contribution room available. But you can no longer own an RRSP by December 31 of the year you turn 71. 

Find out what you can do with your RRSP when you turn 71

What’s the best investment for an RRSP?

You can own a variety of investments within an RRSP, such as mutual funds and segregated funds. Connect with an advisor to find out which investments can help you meet your financial goals. 

What happens to an RRSP when you die?

It depends on the situation. In many cases, an RRSP can roll over to the surviving spouse or common-law partner on a tax-deferred basis. Your spouse won't have to pay tax until they withdraw funds (and then only on what they withdraw during the year). Your spouse doesn’t require additional RRSP contribution room when the rollover happens. Otherwise, subject to a few exceptions, the value of your RRSP is included as income in your final tax return, regardless of who receives the funds (e.g. your adult children, a charity, etc.). This applies to most provinces, but special rules apply if you’re a Quebec resident. 

Talk to a Sun Life advisor for more detailed information

Can you have a successor holder for an RRSP?

No, you can name only beneficiaries to your RRSP. This applies to most provinces. However, in Québec, you can only name a beneficiary to a RRSP for insurance contracts like insurance GICs and segregated funds. Québec doesn’t allow beneficiary designations on mutual funds, stocks, bonds and trust GIC held in a RRSP. 

Connect with an advisor for more detailed information

Can you transfer your RRSP to a spouse or child tax-free during your lifetime?

No. During your lifetime you can’t transfer your RRSP tax-free to someone else. You can withdraw money from your RRSP and give it to your spouse, common-law partner or adult child. You’ll have to pay tax on that withdrawal. 

Talk to a Sun Life advisor to learn more

Can you leave your RRSP to your child?

Yes. You can leave your RRSP funds to your adult children at your death by naming them as the beneficiary of your RRSP1. The value of your RRSP will be included as taxable income in your final tax return. Your estate Your estate includes all of the assets that you owned at the time of your death. An asset can be anything of monetary value, such as a house, car, investments, etc. will have to pay the tax, even though your children will get the money. That’s why it’s important for your estate representative to ensure that they have enough money on hand to pay the tax. If the estate lacks the funds, the government can pursue the RRSP beneficiary for the deficiency. What’s more, in some cases, you may be able to do a tax-free rollover of your RRSP to a child or grandchild who’s financially dependent and has a disability. Speak to a tax and legal advisor to better plan for your unique situation.

1 Most provinces allow you to designate beneficiaries for your RRSPs. However, in Québec, you can only name a beneficiary to a RRSP for insurance contracts like insurance GICs and segregated funds. Québec doesn’t allow beneficiary designations on mutual funds, stocks, bonds and trust GIC held in a RRSP. 

Do beneficiaries pay tax on RRSP money they receive at your death?

It depends on who you’ve named as your beneficiary:

  • If the RRSP money is rolled over to your spouse or common law partner, they won’t pay tax until they take money from the RRSP.
  • If the RRSP money goes to your adult children or anyone else, they won’t pay tax on the money they receive from your RRSP. But the entire value of your RRSP will be included as taxable income in your final tax return.

In rare cases, a child beneficiary may be able to transfer the RRSP money they receive to:

  • a term certain to age 18 annuity (financially dependent child under the age of minority),
  • their own RRSP (adult or minor financially dependent child because of a disability), or
  • a lifetime benefit trust.

In any case, you won’t have a tax liability in your final tax return when you die, and the child will be able to defer receipt of income, and the tax liability. These types of situations require careful planning. This isn’t a comprehensive list of all your options. Speak to a tax and legal advisor to review your and your beneficiary’s unique situations.

 

Do RRSPs bypass probate?

If you’ve named a beneficiary for your RRSP, it’s not subject to probate Probate is the legal process of executing a will.. However, if you don’t name a beneficiary, your RRSPs may be subject to probate. Please note that probate tax varies across provinces and territories. Probate applies to most provinces and territories, except Quebec. 

Learn more about how probate works

Open an RRSP

Life looks different. With our advice, your registered retirement savings plan (RRSP) can too. Connect with a Sun Life advisor about making the most of your RRSP. See the Sun Life difference.

To find an advisor near you, enter your postal code.

Already have an RRSP with Sun Life?

Sign in to my Sun Life to access your account.

 

Sign in
 

Available self-serve features depend on your account, contract or policy.

More about RRSPs from Sun Life:

Footnote

* This information is meant for educational and illustrative purposes only.  It is not meant to be tax advice.  You should consult a tax professional for specific tax advice.