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At RBC, we make it easy for you to open a RegisteredRetirement Savings Plan (RRSP) and help it grow. On top of being a savings tool forretirement, it also may help you lower your tax bill today, by allowing you to deductcontributions (up to your personal deduction limit) from your taxable income.
Below, we’ve rounded up the rules, contribution limits and otherinformation you should know in one handy spot.*
RRSP Basics
How it works, who can open one andthe investments you can hold.
RRSPs are designed to help yousave for retirement:
- The money you invest in your RRSP is tax-deductible(up to your personal deduction limit), and yourinvestment earnings grow on a tax-deferred basis.
- You can technically withdraw funds at any time.However, withdrawals are taxed as regular income inthe year they are made, (except when made under theHomebuyer’s Plan or Lifelong Learning Planprograms).
- When you retire, or no later than the end of theyear in which you turn 71, you can start drawingyour savings and supplement your retirement incomeby converting your RRSP to a Registered RetirementIncome Fund (RRIF) or other income option. And sinceyou will likely be in a lower tax bracket when youretire, you’ll likely pay less tax on thewithdrawals than you would today.
Most Canadians are eligible to open anRRSP. To qualify, you must:
- Be a Canadian resident with a Social InsuranceNumber (SIN)
- Have earned income and file a tax return in Canada
- Open and contribute to your plan no later thanDecember 31 of the year you turn 71.
Like Tax Free Saving Accounts (TFSA)and other types of registered accounts, an RRSP can holdmany types of investments2. Forexample, when you open an RRSP at RBC, you can investin:
- GuaranteedInvestment Certificates (GICs)
- Mutualfunds, including RBC PortfolioSolutions
- Savings deposits
- Stocks and bonds (through RBCDirect Investing)
- Exchange-Traded Funds(ETFs) (through RBC Direct Investing and RBCInvestEase)
RRSPs and TFSAs differ a few ways—justkeep in mind you can have both1Legal:
- RRSP contributions are tax-deductible (up to yourpersonal deduction limit) the year you make them,and your investments grow on a tax-deferred basis.Taxes are paid when you withdraw from your RRSP.While TFSA contributions are not tax-deductible,your investment earnings are never taxed, and youcan withdraw from your plan at any time (dependingon what you invested in) without ever paying tax.
- You have to have earned income to be eligible for anRRSP; TFSA eligibility is based on your age (youneed to be at least 18 or the age of majority inyour province) and residency.
- You can contribute to an RRSP until December 31 ofthe year you turn 71; in a TFSA, you can contributeas long as you want.
See how they stack up.
Types of RRSPs
Plan types and your options atRBC.
In general, there are three differenttypes of RRSPs:
- Individual RRSP: Themoney and tax advantages belong to the person whoopens it.
- Spousal RRSP: Onespouse or common-law partner (usually the higherearner) contributes to the other spouse’s plan. Thecontributing spouse will have the tax advantage butthe funds in the RRSP (no matter who contributes)belong to the receiving spouse.
- Group RRSP (GRSP): Acollection of individual RRSPs administered by anorganization for its employees, who contributedirectly from their payroll using pre-tax dollars.
You can open an individual or spousalRRSP with RBC. In addition, you can enjoy:
- An RRSPwith access to advice from an RBC advisor
- A self-directedRRSP you can trade in at RBC DirectInvesting
- An RRSP where the pros manage your investments foryou at RBCInvestEase
We also offer Group RRSPs for businesses.
RRSP Contributions and Withdrawals
Deduction limit, carry-forwardsand early withdrawals.
The best way to know how much you cancontribute for the current year (also known as your RRSPdeduction limit) is to check your most recent Notice ofAssessment from the CRA .
As a guideline, however, you cancontribute (for the current year) the lower of:
- 18% of your earned income from the previous year
- $29,210, which is the maximum you can contribute in2022
- The remaining limit after any company-sponsoredpension plan contributions
To be eligiblefor an RRSP deduction in a specific taxyear, you must make contributions duringthat calendar year, or up to 60 days intothe following year.
You can contribute to your RRSP upuntil December 31 of the year you turn 71. At thatpoint, you have to convert your plan to a RegisteredRetirement Income Fund (RRIF), use the funds to buy anannuity or cash out your RRSP (not recommended).
Fortunately, RRSP contribution room iscumulative, which means any unused room from previousyears is added to your current contribution room—alsoknown as your carry-forward amount. The amount is shownon your Notice of Assessment.
Your contribution limit may vary, but let’sassume yours is the maximum annual limit of$29,210 and you don’t have a company pensionplan. We’ll also assume you have maxed out yourRRSP each year since you opened the account.
So far, this year, you have put $20,000 into yourRRSP. If you do not contribute an additional$9,210 this year, then $9,210 in contributionroom will be added to your annual contributionmaximum next year and will continue to carryforward into future years until you make up thecontribution, or up to December 31 of your71st year, whichever comes first.
Find out how much RRSP contribution room you haveby visiting the CRA web site.
If you plan to max out your RRSP, keepa close eye on your contribution room. When you gobeyond the maximum, it is considered anover-contribution.
- You can go up to $2,000 over the contribution limitwithout penalty. However, you have to withdraw thesecontributions before any new contributions can beapplied.
- The CRA will charge a 1% tax per month on excesscontributions that exceed your RRSP deduction limitby more than $2,000.
If you have a company-sponsoredregistered pension plan (RPP) or deferred profit-sharingplan (DPSP), your RRSP contribution limit will bereduced by the total value of the pension credits youearned for the year. This amount is referred to as apension adjustment (PA) and is reported on the T4 slipthat you receive from your employer.
Taking money out of your RRSP may notbe a good idea because of the taxes you’ll have to pay(see below). However, there are two exceptions:
- With a written agreement to buy or build your first home as a resident of Canada, the Home Buyers’ Plan lets you withdraw up to $60,000. You have 15 years to pay back the amount you took out, the repayment period begins as of the second year after the first withdrawal was made. For withdrawals between January 1, 2022 and December 31, 2025, the repayment period begins as of the fifth year after the withdrawal was made.
- With the Lifelong LearningPlan, you can borrow up to $10,000 a yearfrom your RRSP ($20,000 maximum over four years) togo back to school full-time. Again, there are rulesabout eligibility, and how and when you’ll need topay back this money.
RRSP Taxes and Fees
How RRSPs are taxed, plus detailson transfers and fees.
RRSPs offer tax advantages that canhelp you stretch your retirement savings. Here’s a quicklook at how each of the following is taxed:
- Contributions: Youcan deduct RRSP contributions on your tax return (upto your deduction limit), which lowers your taxableincome in the year you make the contribution.
- Investment growth:Investment income and capital gains within an RRSPare not taxed until you take the money out, givingyour savings the chance to grow faster.
- Withdrawals: They’reconsidered taxable income and withholding taxes mayapply (we’ll share more about that below), unlessyou’re borrowing under the Home Buyers’ Plan orLifelong Learning Plan.
If you withdraw money from your RRSPearly, you will have to pay withholding taxes on thewithdrawal—as much as 30%:
- The financial institution where you hold your RRSPmust deduct the withholding tax and send it to thegovernment on your behalf.
- You’ll also have to include the withdrawal as incomeon your tax return at the end of the year, whichcould raise your tax bill.
- You will not be able to re-contribute the amount youwithdrew in the future.
We recommend talkingto an advisor before taking moneyfrom your RRSP early.
| Amount of RRSP Withdrawal | All Provinces Except Quebec | Quebec |
|---|---|---|
| Up to and including$5,000 | 10% | 20% |
| $5,000.01 to $15,000 | 20% | 25% |
| More than $15,000 | 30% | 30% |
You can transfer RRSPs betweenfinancial institutions at any time without paying taxeson them. You can also move some or all of your moneybetween eligible investments within your RRSP.
There’s no limiton how many RRSPs you can have—but the totalcontribution room of all your accounts isthe same as if you only had one.
At RBC, we don’t charge anyaccount-related fees for RRSPs, with oneexception—there’s a service fee if you transfer yourRRSP outside of RBC. The fee is $150 at RBC Royal Bank,$135 at RBC InvestEase and $150 at RBC Direct Investing.The fee could change, but we’ll let you know at least 30days before the changes go into effect.
Invest in an RRSP Today
Choose from the following options to open or contribute to anexisting account:
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Royal Bank of Canada and RMFI shall not be liable for any losses or damagesarising from any errors or omissions in information contained in thiscalculator.
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The servicesprovided by RBC InvestEase are only available in Canada.
Information about the RRSP is based on what is currently available from theCanadian government and can be subject to change.
1)
Subject to meeting the eligibility requirements of both accounts.
2)
Assets in an RRSP must be Qualified Investments under the Income Tax Act. If theRRSP holds non-Qualified Investments, it could be subject to tax.
3)
Real-time streaming quotes are available automatically to all clients forexchange listed equities, ETFs and most over-the-counter (OTC) securities.Real-time streaming quotes for options and grey market OTC securities areavailable to Active Traders and Royal Circle clients upon accepting the termsand conditions of all exchange agreements on the RBC Direct Investing onlineinvesting site.
