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? 

Any contributions into your RRSP can help you decrease your current taxable income. This means you won’t have to pay taxes on your contributions or any investment growth until you withdraw funds.

For most Canadians, withdrawing from your RRSP at a later point in life – in your 60s or 70s – means paying much less tax.

Think of it this way: you’ll probably be in a much lower tax bracket when you’re retired in your 60s or 70s. 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. 

Plus, you can hold a variety of investments in your RRSP, like:

  • stocks,
  • bonds, 
  • segregated funds,
  • GICs, and 
  • mutual funds.

How do you benefit from an RRSP? 

When you retire, you can use funds from your RRSP to cover any expenses, including:

  • medical or health-related costs (e.g. prescription drugs, health insurance, etc.),
  • where you’ll live,
  • travel and vacation plans, 
  • what hobbies you may take up and more.

Retirement can be a great time to focus on yourself and enjoy your leisurely years. But it also comes with a price. An RRSP can help you cover the costs that come with retirement. 

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.


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

RRSPs after retirement, transfers, and death

It depends how old you are when you retire. You must move your money out of your RRSP by December 31 of the year you turn 71. After that, you can convert your savings to another registered account like a registered retirement income fund (RRIF), purchase an annuity, or withdraw your funds. 

Depending on how your registered accounts are set up, they may be treated differently when you die.

In general, at the time of death, the owner of the RRSP is deemed to have cashed out their RRSP assets.

However, let's say you've named your spouse as the beneficiary of your RRSP. In this case, your RRSP can be rolled over to your spouse after your death. This roll-over would be tax-deferred, meaning your spouse won't have to pay taxes until they withdraw funds. Keep in mind that your spouse does not require additional RRSP contribution room when the rollover happens. Talk to a Sun Life advisor to learn more.

Your child will receive the full value of your RRSP funds. But the entire value of the RRSP will also be included as taxable income in the final tax return that will be filed when you die. Please note that generally, your estate is responsible for the associated tax liability. Speak to a lawyer or tax professional to better plan for your situation.

There is no way to transfer your RRSP account to someone else. You also can’t transfer money from your RRSP to someone else’s RRSP. 

Open an RRSP today 

Ready to start investing and saving? Our advisors are ready to help you open your RRSP. They can help you make well-informed financial decisions and maximize your savings. They can also address any questions and concerns you may have.

Enter your postal code to find an advisor near you.

Types of RRSPs

Here are three common types of RRSPs you’ll come across.

Regardless of what type of RRSPs you have and how many you have, you’re still responsible for staying under your contribution limit. 

What is an individual RRSP?

It’s an RRSP registered in your own name.

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Who can contribute to an individual RRSP?

Only you can contribute to it. 

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How much can I contribute to an individual RRSP?

18% of your earned income plus any unused room from earlier years.

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Are contributions to individual RRSPs tax deductible?

Yes, these RRSP contributions are tax deductible. 

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Who can make withdrawals to individual RRSPs?

Only you can make withdrawals

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What is a spousal RRSP?

A spousal RRSP is an RRSP that’s set up in the name of one spouse.

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Who can contribute to a spousal RRSP?

The spouse whose name is not on the RRSP. For example, if you were to set up a spousal RRSP in your partner’s name, then only you can contribute to it.

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Do my contributions to a spousal RRSP count towards my own contribution limit?

Yes, your contributions to your spouse’s spousal RRSP counts against your own limit. But your spouse’s contribution limit isn’t affected.

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Who can make withdrawals from a spousal RRSP?

The spouse whose name is in the RRSP.

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Who gets the tax deduction for a spousal RRSP?

The spouse that contributes to the spousal RRSP gets the tax deduction.

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What is a group RRSP?

A group RRSP is an RRSP that’s set up in the name of a group, such as the employees of a company or members of a professional organization. For example, if you have an RRSP through your employer or group benefits, then that’s considered a “group RRSP.”

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Who can contribute to a group RRSP?

You and your employer can contribute to a group RRSP.

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How much can I contribute to a group RRSP?

18% of your earned income plus any unused room from earlier years.

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Can I contribute to a group RRSP through payroll deductions?

Yes. This lets you invest throughout the year, but you’ll be responsible for staying under your contribution limit.

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Who can make withdrawals from a group RRSP?

Only you. 

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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 Buyer’s 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 or your spouse or common-law partner for a full-time education or training program.

 

Lifelong Learning Plan FAQs

More about RRSPs from Sun Life:

* 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.