One of the more commonly misunderstood elements with your RRSP is contribution limits.
If you're looking for more information on RRSPs, its history and what it can do for your short- and long-term future: check out our blog on Know the RRSP Contribution Deadlines.
RRSP maximum contributions
RRSP stands for “registered retirement savings plan.” It’s a program offered by the federal government to lower your tax obligation by investing in your retirement.
The money you invest into your RRSP is deducted from the total amount you’re taxed for the year you contribute. Depending on your total income and contribution, you could put yourself into a lower tax bracket by saving for retirement.
Additionally, the gains earned from investments in your RRSP are not taxed, so the nest grows bigger faster.
It’s a fantastic program that every working Canadian should consider.
Why not put all your investments into an RRSP?
How great would it be to lower your tax bill down to zero by funding your RRSP with everything you can? The government thought of that, too, and so they set RRSP maximum contribution limits.
This year’s universal RRSP contribution limit is $32,490
Your RRSP limit for any given year will be the lower of either (a) that year’s universal limit or (b) 18% of the income you earned the previous year. This year, your earned income would have had to be $180,500 to meet the universal limit.
A major upside of the RRSP program is the carry forward policy. If you can’t make your maximum contribution in a given year, you can carry the difference into the following year.
So, if your earned income this year was $100,000, your limit would be $18,000. If you only contributed $15,000, you can carry over that $3,000 of room to next year’s limit and the year after until you fill it.
Over-contribution has a price
The CRA levies a 1% fine per month for contributing beyond your limit (with a $2,000 buffer), So, if your limit was $18,000 and you put in $28,000, you’d be fined 1% of $8,000 every month. It doesn’t seem like much, but that’s a $960 fine after a year and $9,600 after ten years. Not worth it.
Strategies for anyone to maximize RRSP contributions
This year’s RRSP deadline is March 2nd, 2026, the last day RRSP contributions will count toward your 2025 tax return. Without question, the best strategy for maximizing your RRSP contributions is to not wait until the eleventh hour. Instead, contribute a bit from every paycheque starting in January.
Other strategies for reaping the most benefit from your RRSP contributions include:
The spousal RRSP — If your spouse earns significantly less than you, you can contribute to their RRSP and claim the tax credit while your spouse gets to keep the money in their RRSP to grow tax free for their retirement years.
Borrowing to contribute — Depending on what your RRSP room calculator comes back with, an RRSP loan might make financial sense if the tax benefits outweigh the interest obligations on the loan.
Timing your deductions — You don’t have to deduct your entire contribution from your taxes. If you expect your earnings to rise, or you know your earnings can fluctuate, you can save the deductions for a year you earn more. This is an especially smart strategy if you foresee yourself jumping up a tax bracket in the future.
RRSP contribution maximization strategies by age
The RRSP is a long-term play for the comfort of financial stability in your retirement years, but you’ll approach it differently depending on your life stage.
RRSP strategies in your twenties and thirties
Consistency is everything. Set and forget a monthly transfer from your main bank account and your RRSP account so you never have to think about it again. Also, because retirement is a long way off, you have the runway to take some risks and recover from them if they don’t work out.
RRSP strategies in your forties and fifties
Retirement is still far off but steadily creeping closer. Maybe you’re making plans? Maybe you’re not? But you’re acutely aware that (a) you’ve likely worked longer than you will work, and (b) your post-working life ideas are going to require money. The time for big risk has most likely come and gone. You’ll want to load your RRSP up with stable assets you know will grow.
RRSP strategies in your sixties
Post-working life is close, you know what you want to happen next, and you’re close to having the money to make it a reality. With your kids out of the house you have fewer financial commitments, so this is the time to push hard towards retirement. If you have unused room, this is the time to start using it.
Have you contributed to your RRSP this year?
If not, you still have time. As mentioned above, the deadline for contributions that can be applied to your 2025 tax return is March 2nd, 2026. An Optimize financial advisor can help you create a contribution plan to create retirement wealth with intention and protect it with equal intentionality.
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This content has been prepared for general informational and educational purposes only and does not constitute investment, tax, legal, or financial advice. The information provided is not intended as a recommendation or solicitation to buy or sell any security or to adopt any investment strategy. Readers should consult their own tax advisor or financial professional regarding their individual circumstances. All investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Not all investments are suitable for all investors.
Contribution limits, tax rules, and deadlines are based on current legislation and CRA guidance as of the date of publication and may change. Always confirm your RRSP and TFSA limits through your CRA Notice of Assessment or CRA My Account.