RRSP Contribution Deadline For 2024 (2024)

A Registered Retirement Savings Plan (RRSP) is a tax-sheltered investment vehicle that allows Canadians to prepare for retirement in the long run—and lower their taxable income in the short term. Any contributions to your plan result in an annual tax deduction, meaning that your effective earned income is lowered, reducing your marginal tax rate.

Additionally, any gains made in an RRSP are also tax-deferred, so you only pay tax on funds when they are withdrawn. Keep in mind that because RRSPs have so many tax-related benefits, they do have an annual contribution limit—that does carry over unused rooms each year.

Though they are called savings plans, that does not mean that they are only savings accounts. On the contrary, RRSPs can hold a variety of investment vehicles:

• Bonds
• Securities
• Mutual funds
• Equities
• Private company shares
• GICs
• Exchange-traded funds (ETFs)

When you withdraw funds from an RRSP, deregistered funds will be subject to taxes which are withheld by your financial institution at a specific rate of either 10%, 20% or 30%. For example, any amounts withdrawn over $15,000 are subject to a 30% withholding tax. Note that this amount may not cover all of the taxes owed, depending on your marginal tax rate for the year you made the withdrawal, as you’ll need to include these funds as taxable income. While you can withdraw money at any time, the hope is that by the time you’re making withdrawals you will be retired and in a lower tax bracket than you were when you were working, so you’ll be paying less tax overall.

Account holders can also withdraw from their RRSP without tax consequences through the Home Buyers’ Plan (HBP), if they plan to buy a home, and Lifelong Learning Plan (LLP), if they plan to pursue education, so long as they pay the funds back into their RRSP within a given time period. Account holders can also convert their RRSP to a Registered Retirement Income Fund (RRIF) at any age, though this happens automatically at the end of their 71st year. RRIFs allow access to retirement funds through minimum withdrawal amounts set by the CRA. Any amounts withdrawn less than or equal to CRA minimums are not subject to withholding tax, whereas any amounts over the designated minimum are.

Related: Best RRSP Savings Accounts

For 2023, the annual RRSP contribution limit for all Canadians is set at $30,780, according to the CRA. While that is the maximum RRSP contribution threshold, your contribution room is calculated on an individual basis. Simply put, your personal RRSP contribution limit is either the annual limit or 18% of your previous tax year’s earned income, plus any unused contribution room from the previous year—whichever number is less.

For example, assuming you contributed the maximum RRSP amount in the 2022 tax year, and you make $65,000 per year, you would be able to contribute approximately $11,700 for the 2023 tax year.

There are some exceptions to the above guidelines. If you contributed to a pension plan or a deferred profit-sharing plan in that tax year, the CRA will reduce your RRSP contribution room accordingly.

Keep in mind that you don’t need to crunch the numbers yourself: The CRA highlights your available contribution room on your Notice of Assessment from your previous tax return.

The key benefit that comes with contributing to an RRSP is the reduction of your taxable income. Any amount deposited into an RRSP for a given tax year will reduce your earned taxable income by that same amount—thereby lowering the amount of tax you owe.

Let’s say you made $80,000 in Ontario last year. Given your income, your federal marginal tax rate is 20.5% and your provincial marginal tax rate is 9.15%, giving you a total marginal tax rate of 29.65%. Remember that your total marginal rate is the highest combined tax bracket you fall into given your income, not your average tax rate, as Canada uses a progressive tax system. Your average tax rate on an income of $80,000 is around 22% according to our income tax calculator, which is $17,777 excluding Canada Pension Plan (CPP) and Employment Insurance (EI) deductions.

Now let’s assume you made an RRSP contribution of $8,000. This would reduce your taxable income to $72,000, lowering your average tax owed to $15,405, saving you $2,372 in income tax, again excluding CPP and EI deductions.**

Another major perk is that your account grows over time on a tax-deferred basis. Though you will pay taxes when you withdraw funds, if your retirement income is significantly less than your current income, you are still saving money in the long run.

Setting up and contributing to an RRSP is simple. If you want to open an RRSP, contact your preferred financial institution and they will advise you on first steps—and the types of investments their plans can contain. Many will have investment plans that are tailored to your risk tolerance and financial goals.

You can also set up a self-directed RRSP, where you have more choice over what kinds of assets or securities to invest in within the RRSP and how.

Contributing is easy, too. Many institutions allow you to make lump sum or recurring contributions from a non-registered account (such as your savings account).

You can also contribute to an RRSP through your employer, if they offer a group RRSP. These plans allow your employer to deduct RRSP contributions from your paycheque each month and your employer will match them up to a certain amount. Note that the amount your employer contributes to your RRSP counts towards your contribution room and gives you a tax deduction.

Related: Best RRSP Savings Accounts

RRSPs are arguably one of the best investment vehicles for Canadians saving for retirement given their tax-sheltered status. As such, contributing to them as much as possible may be a prudent choice. However, each individual’s financial situation is different. If you’re hoping to lower your taxes and increase your RRSP savings for the 2023 tax year, keep an eye on the upcoming contribution cutoff date.

**Note: These figures are estimates for illustrative purposes only and may not represent actual tax savings on an income of $80,000 made in the province of Ontario. For advice on tax savings and RRSPs, please consult a licensed financial advisor.