A Registered Retirement Savings Plan is the original tax-sheltered retirement account in Canada. Contributions are deductible from your taxable income in the year you make them (or any future year if you carry the deduction forward), the investments grow tax-deferred, and you pay regular income tax on every dollar you withdraw.
Annual contribution room: 18% of your prior year's earned income, capped at $32,490 for 2026 (the cap rises each year). Unused room carries forward.
Key dates: - The first 60 days of the calendar year still count toward the previous year's deduction. So contributions made in early 2026 can be claimed on your 2025 tax return. - You must convert the RRSP to a RRIF (Registered Retirement Income Fund) by December 31 of the year you turn 71.
Spousal RRSP: you contribute to an account in your spouse's name. The contribution comes out of your room and gets you the deduction, but at retirement your spouse withdraws it and pays tax at their (presumably lower) marginal rate. Useful for couples with very asymmetric incomes.
When RRSP makes sense: when your current marginal rate is meaningfully higher than your expected retirement marginal rate. For a low-income earner, TFSA is usually better because deferring a low rate doesn't save much.
Common mistakes: over-contributing past the $2,000 lifetime cushion (1%/month penalty), withdrawing without understanding the immediate tax hit, and treating the room as “reserved” — once you withdraw, the room is gone forever (unlike TFSA).