Registered Savings Plans

Canada’s registered savings plans share a common idea — the government gives up tax in exchange for you saving toward a specific goal — but each works differently. This page summarises the rules for all six in one place, with anchored sections you can link to.

RRSP — Registered Retirement Savings Plan {#rrsp}

The RRSP is the older of the two main retirement accounts. Contributions are deductible in the year you make them, the investments inside grow tax-deferred, and withdrawals are fully included in taxable income when you eventually take the money out.

Contribution room. Each year you earn new room equal to 18% of your prior year’s “earned income”, up to an annual maximum. For 2025 the annual maximum is $32,490. Unused room carries forward indefinitely. Your specific limit is on your Notice of Assessment.

When the RRSP makes sense. When your marginal tax rate today is higher than you expect it to be at withdrawal — which, for most people during their peak earning years, it is. If your current rate is lower than your expected retirement rate, the TFSA is usually a better fit instead.

Withdrawals. You can withdraw at any time, but withdrawals are taxed at your marginal rate plus a withholding tax (10–30% federally, depending on the amount). Two notable exceptions are the Home Buyers’ Plan (up to $60,000 toward a qualifying first home, repaid over 15 years) and the Lifelong Learning Plan (up to $20,000 for full-time education).

RRIF — Registered Retirement Income Fund {#rrif}

By the end of the year you turn 71, your RRSP must be converted to a RRIF (or annuity, or cashed out entirely — usually a bad idea). The RRIF is the same investment account, but with a mandatory minimum withdrawal each year based on a CRA-published age factor. You may withdraw more than the minimum.

The RRIF minimum is calculated as your account balance at the start of the year multiplied by an age-based percentage that rises each year. Withdrawals are taxed as ordinary income; amounts over the minimum are subject to withholding tax.

TFSA — Tax-Free Savings Account {#tfsa}

The TFSA is the simplest and arguably the most powerful registered account. Contributions are not deductible, but everything inside grows tax-free and all withdrawals are tax-free.

Annual limit. $7,000 for 2025 (indexed to inflation, rounded to the nearest $500). The lifetime room since 2009 is the cumulative total for any Canadian resident over 18 from that year — $102,000 by 2025 if you have never contributed.

Re-contribution rule. Money withdrawn from a TFSA is added back to your contribution room — but only on January 1 of the following year. Re-contributing mid-year without sufficient remaining room results in an over-contribution penalty.

Best uses. Emergency fund, medium-term goals, retirement savings if your current tax rate is low, and any income that would otherwise be heavily taxed (interest, foreign dividends).

FHSA — First Home Savings Account {#fhsa}

Introduced in 2023, the FHSA is the newest registered account and combines the best features of the RRSP and TFSA for first-time homebuyers: contributions are tax-deductible (like an RRSP) and qualifying withdrawals for a first home are tax-free (like a TFSA).

Limits. $8,000 per year, $40,000 lifetime. Unused room carries forward up to $8,000 (so you can catch up by one year, not unlimited).

Eligibility. You must be 18+, a Canadian resident, and not have lived in a home you (or your spouse) owned in the current or four preceding years.

Time limit. The account must be closed by the end of the 15th year after opening, or the end of the year you turn 71, whichever is earlier. Unused balance can be transferred to an RRSP or RRIF without affecting RRSP room.

RESP — Registered Education Savings Plan {#resp}

A tax-shelter for post-secondary education savings. Contributions are not deductible, but the Canada Education Savings Grant (CESG) adds 20% on the first $2,500 you contribute each year (so up to $500/year in free money per child), to a lifetime grant maximum of $7,200.

Lifetime contribution limit. $50,000 per beneficiary, no annual cap. The CESG is paid until the beneficiary turns 17, with reduced eligibility in the final two years if no prior contributions have been made.

Withdrawals. When the beneficiary attends a qualifying post-secondary program, withdrawals come in two streams: contributions (returned tax-free to the subscriber) and Educational Assistance Payments (the growth and grants — taxable in the student’s hands, usually at a very low rate or zero).

If the beneficiary doesn’t attend. Grants are returned to the government. Growth can be transferred to the subscriber’s RRSP (subject to room) or withdrawn as taxable income plus a 20% penalty.

RDSP — Registered Disability Savings Plan {#rdsp}

The RDSP is a long-term savings plan for Canadians eligible for the Disability Tax Credit (DTC). It combines two government top-ups:

• The Canada Disability Savings Grant (CDSG) — up to $3,500/year, lifetime maximum $70,000, matching at 100%–300% depending on family income
• The Canada Disability Savings Bond (CDSB) — up to $1,000/year, lifetime maximum $20,000, paid without requiring contributions for lower-income families

Contribution limit. $200,000 lifetime per beneficiary, no annual cap. Contributions are not deductible.

Important rules. Withdrawals must usually wait at least 10 years after the most recent grant or bond contribution; earlier withdrawals trigger clawback. The CDSG and CDSB stop after the year the beneficiary turns 49.

TFSA vs RRSP — the basic decision

The most common question we get is “should I prioritise my RRSP or my TFSA?” The mathematically correct answer is: compare your current marginal tax rate to your expected withdrawal rate.

• If your current rate is higher, the RRSP wins (you save tax at the higher rate now and pay it back at the lower rate later).
• If your current rate is lower (e.g. early career, low-income year), the TFSA wins (no benefit from a deduction now, but tax-free growth and withdrawals are still valuable).
• If they’re equal, the two plans produce identical after-tax outcomes for a same-dollar contribution — though the TFSA gives you more flexibility.

In practice most people benefit from holding both and prioritising based on where they are in their earnings curve.

A dedicated TFSA vs RRSP comparison page walks through worked examples.