Taxes & Accounts

RRSP

An RRSP is a registered retirement savings plan. Deductible contributions can reduce tax now, growth is generally sheltered while inside, and withdrawals are generally taxable later.

4 min

Taxes 101 • 07

RRSP stands for Registered Retirement Savings Plan.

It is designed to help Canadians save for retirement under special tax rules.

The core idea is usually tax deferral.

Deductible contributions can reduce taxable income now, while withdrawals are generally included in income later.

An RRSP can involve

01Contribution room02A possible tax deduction03Tax-sheltered growth while money stays inside04Taxable withdrawals05Different investment choices

Contribution and withdrawal point in opposite tax directions.

01

Contribution

May create a deduction, subject to your limit and rules.

02

Withdrawal

Generally becomes taxable income.

The benefit is not simply the size of the refund.

ContributionExample $5,000
Deduction claimedUp to applicable available amount
Tax saved nowDepends on your tax situation
Withdrawal laterGenerally taxable

An RRSP does not make tax disappear.

It generally changes when tax is paid and can change the rate that applies depending on your circumstances.

Before contributing, know

01Your RRSP deduction limit02Whether you need the deduction now03Your retirement timeline04What the RRSP will hold

Remember this

RRSPs generally delay tax rather than erase it.

Think about the contribution, the investment growth and the future withdrawal as one system.

Lesson complete

Reviewed 2026-08-18

Sources

Canada Revenue AgencyRegistered Retirement Savings Plan ↗Canada Revenue AgencyHow contributions affect your RRSP deduction limit ↗
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