RRSP basics – the ABCs of RRSPs

What is an RSP?

A Registered Retirement Savings Plan (RRSP or RSP for short) is a special kind of investment account designed to help you save for retirement. It is registered with the Government of Canada. You can contribute funds to an RSP for yourself, and you can also contribute to an RSP for your spouse or common-law partner. Your contributions to an RSP are tax deductible and can be used to reduce your tax.

You can use the contributions to purchase investments, and the gains and income generated from those investments are not taxed as long as the funds remain in the plan. However, withdrawals from your RSP are treated as taxable income.

What is a self-directed RSP?

With a self-directed RSP, you have the freedom to oversee the investments in your RSP. You can make all the decisions about which investments to buy or sell, and manage your account when it's most convenient for you.

What types of investments can I hold in an RSP?

You can hold a wide range of investments within an RSP, including stocks, ETFs, mutual funds, bonds, GICs, and cash.

How much can I contribute to my RSP?

There are limits to how much you can contribute each year to your RSP or to your spouse's RSP. The maximum allowable contribution for the 2021 taxation year is: $27,830. Your allowable contribution room is the lower of:

• 18% of the earned income reported on your tax return for the previous year
• The maximum annual contribution limit for the year, which is set by the government
• The remaining limit after any employer-sponsored pension plan contribution

You can carry forward unused RSP contribution room since 1991.

To find out the exact amount you can contribute this year, as well as your carry-forward contribution room, check your most recent Notice of Assessment from Canada Revenue Agency, or log in to your online account with CRA.

Is there an annual deadline to contribute to an RSP?

In order to be eligible for an RSP deduction in a specific taxation year, you can make contributions anytime during that year, or up to 60 days into the following year.

How long can I contribute to an RSP?

You can contribute to your RSP until December 31 of the year in which you turn 71. After that, you must withdraw the assets, convert them into a Registered Retirement Income Fund (RRIF) or purchase an annuity.

When can I start contributing to an RSP?

There is no minimum contribution age, but you must have earned income reported to Canada Revenue Agency. The sooner you start contributing to your RSP, the better, in order to take advantage of the power of compounding.

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