RRSPs FAQ: how much can you contribute, when are withdrawals taxed, and what happens at 71?

By FastBuySale Newsroom · 5 Nov 2026 · 19m ago

Contributions: how much, when and what if you go over?

This RRSPs FAQ answers the common questions answered most often by the Canada Revenue Agency (CRA). The short version: a registered retirement savings plan (RRSP) lets you deduct contributions to reduce your tax, income earned inside the plan is usually exempt from tax while it stays there, and you generally pay tax when money comes out. Your yearly room is generally 18% of your previous year's earned income, up to an annual limit that was $32,490 for 2025, plus any unused room carried forward.

An RRSP is a retirement savings plan that you establish, the CRA registers, and to which you or your spouse or common-law partner contribute. You can contribute until December 31 of the year you turn 71, as long as you have available deduction room.

How is my RRSP deduction limit calculated? The CRA generally takes your unused RRSP deduction room at the end of the preceding year, plus the lesser of 18% of your earned income in the previous year or the annual RRSP limit ($32,490 for 2025), minus your pension adjustment (PA) if you belong to a workplace pension, plus any pension adjustment reversal, minus any net past service pension adjustment. Your exact figure appears on your notice of assessment and in your CRA account; Chart 3 of Guide T4040 lets you calculate it yourself.

Worked example using the rule: if you earned $60,000 last year, had no pension adjustment and no unused room, 18% gives $10,800 of new room, which is under the annual limit. If you earned $200,000, 18% would be $36,000, so the 2025 annual limit of $32,490 applies instead.

What is the deadline? For a deduction on your 2025 return, contributions made from March 4, 2025 to March 2, 2026 qualify. Contributions made early in a calendar year, up to the deadline, can therefore count for the previous tax year.

What if I contribute too much? The CRA says you generally pay a tax of 1% per month on contributions that exceed your RRSP deduction limit by more than $2,000. Track contributions at every institution, including group RRSPs at work.

What can't I deduct? Administration fees, brokerage fees inside a trusteed RRSP, interest on money borrowed to contribute, capital losses inside the RRSP and employer contributions to a PRPP. Repayments under the Home Buyers' Plan or Lifelong Learning Plan are not deductible contributions either.

Do I have to deduct the contribution this year? No. You can claim unused RRSP contributions from a previous year, so if you expect a higher income later, you may get more value by waiting. See your tax bracket with the

Readers evaluating Registered Retirement Savings Plan should separate marketing claims from the actual rule text that governs their account or product. When two summaries disagree, the governing document or statute wins. If a rule depends on your age, filing status, or income band, re-check it when any of those facts change. Life events quietly move people across thresholds they last reviewed years earlier.

Withdrawals: how are they taxed?

Can I withdraw at any time? If your RRSPs are not locked in, yes. Locked-in RRSPs generally do not allow withdrawals. A direct transfer from one RRSP to another is a transfer, not a withdrawal.

How much tax is withheld? For residents of Canada, your financial institution withholds 10% on amounts up to $5,000, 20% on amounts over $5,000 up to $15,000, and 30% on amounts over $15,000. In Quebec the federal rates are 5%, 10% and 15%, with provincial tax withheld too. Non-residents generally face 25% withholding unless a tax treaty reduces it.

Is the withholding my final tax? Not necessarily. The CRA warns that withholding may not be enough for your tax bracket, and you include the withdrawal in income on your return, so you may owe more. Splitting a withdrawal into smaller pieces changes withholding, not the final tax you owe.

What about spousal RRSPs? If you contributed to your spouse's or common-law partner's RRSP in the current year or the two years before, you may have to include in your income some or all of what they withdraw. Plan withdrawals around this attribution rule.

Should I keep money invested instead? Income in the plan is usually tax-exempt while it remains there, so early withdrawals give up future tax-sheltered growth. Model the difference with the and the

A useful habit is to write down your goal, time horizon, and cash buffer before you change any election related to Registered Retirement Savings Plan. Decisions made during a stressful week are the ones people reverse later at a cost. Educational explainers like this one cannot replace personalized advice for complex situations such as divorce orders, inherited accounts, or cross-border tax residency. Escalate those cases to a qualified professional.

Home Buyers' Plan and Lifelong Learning Plan: tax-free borrowing from yourself

How much can I take for a first home? The Home Buyers' Plan (HBP) withdrawal limit is currently $60,000. It lets you withdraw from your RRSPs to buy or build a qualifying home for yourself or a specified disabled person.

When do I repay the HBP? Normally repayments start in the second year after your first withdrawal, over 15 years. Temporary relief means that for a first HBP withdrawal between January 1, 2026 and December 31, 2028, the 15-year repayment period starts in the fifth year after the withdrawal year instead; a first withdrawal in 2026 means a first repayment year of 2031.

Can I combine the HBP with an FHSA? Yes. The CRA says you can withdraw under the HBP and make a qualifying FHSA withdrawal for the same qualifying home if you meet the conditions of each. Read before you start.

What is the Lifelong Learning Plan (LLP)? It lets you withdraw RRSP money to finance training or education for you or your spouse or common-law partner. The withdrawal is not included in income and no tax is withheld, but you must repay it over a repayment period of generally 10 years. Any amount not repaid when due is included in your income for that year.

Keep digital and paper copies of confirmations after every change. Screenshots of election pages, email receipts, and year-end statements make tax season and job changes far less chaotic. Compare fees the same way you would compare two similar listings before you buy: look at what you pay each year, what you get, and whether a simpler option meets the same need.

Turning 71 and choosing between an RRSP and a TFSA

What happens when I turn 71? December 31 of the year you turn 71 is the last day you can contribute to your own RRSPs. In that year you must withdraw the funds, transfer them to a registered retirement income fund (RRIF), or use them to buy an annuity. No tax is withheld on amounts transferred directly to a RRIF or used to buy an annuity; you pay tax as you receive payments.

Can I still contribute after 71? Yes, to a spousal or common-law partner RRSP, up to your deduction limit, if your spouse or partner is 71 or younger on December 31 of the year you contribute.

RRSP or TFSA? RRSP contributions are deductible and withdrawals are generally taxed, while a TFSA works the other way round, so the better fit depends largely on your tax rate now versus in retirement. Compare them in and

Where do I check my numbers? Your notice of assessment and your CRA account show your deduction limit, unused contributions and any HBP or LLP balances. Keep them handy before every contribution.

Found this Registered Retirement Savings Plan explainer useful? Share it with a friend, tell us what we missed in the comments, and get the FastBuySale app on Google Play () for more guides. Have something to sell? Post a free listing at in a couple of minutes.

💬 Join the discussion on this article →

More in Finance · Trending News · Browse local deals