The deadline to contribute in a registered retirement savings plan is on Monday.
Canadians have until March 3 to make any RRSP contributions count towards deductions for the 2024 tax year.
Any money set aside in an RRSP after that date can only be claimed in a tax refund next year.
Money that goes into an RRSP is exempt from being taxed until it is taken out, so it is essentially the government’s way of incentivizing people to save for retirement by reducing their taxable income, said Gerry Vittoratos, national tax specialist at UFile Canada.
“The immediate reward that you get from contributing to the RRSP is the fact that you’re lowering your tax bill,” he said.
According to TD Bank, investment income that is earned within the RRSP is tax-deferred until it’s withdrawn.
That means whatever money is in an individual’s RRSP account, as long as it’s not taken out, it does not get taxed every single year and compounds tax returns, Vittoratos said.
How much can you put in RRSP?
For 2025, the maximum amount a person can put in their RRSP account is capped at 18 per cent of the earned income from the previous year or $32,490 – whichever is lower.
Any unused room from previous years also carries over when Canada Revenue Agency calculates each person’s annual RRSP deduction limit.
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To check the RRSP deduction limit, Vittoratos advised looking at last year’s notice of assessment or logging in to your CRA account.
Is an RRSP right for you?
If you’re unsure about contributing to an RRSP, there are some factors to consider, including your income.
Vittoratos said the RRSP is not as beneficial for someone in the lowest tax bracket, earning an income of less than $57,000 per year because their tax deduction won’t be that high.
In comparison, an RRSP contribution might make more sense for those earning a higher income, he said.
What a person plans to do with the investment income should also be considered.
If the plan is to save for retirement and use the money in the long term, then an RRSP is “always the best option,” because you would be getting a tax reduction right away, Vittoratos said.
However, if someone is looking to save in the short-term for things like a car or vacation, then an RRSP is not the right fit for them and the tax-free savings account would be a better option, he said.
How much should you put in the RRSP?
How much money a person sets aside will depend on their personal financial situation, but 10 per cent of the income is an ideal benchmark, Vittoratos said.
However, if someone has a high credit card debt, then they should prioritize paying that off first before putting money in the RRSP.
“If you have high-interest debt, forget saving for your RRSP. Get rid of that debt first,” Vittoratos said.
He also advised making monthly payments as opposed to a last-minute lump sum contribution before the deadline.
“A lot of people try to catch up at the last minute, especially because the deadline is on Monday, but I would say don’t do that.”
If someone contributes above their RRSP limit by more than $2,000 then they would generally have to pay a tax of one per cent per month on their contributions, according to the CRA.
For 2025, the contribution room for TFSA is $7,000.
The TFSA limit was increased from $6,500 in 2024.
Whatever gains that are made in a TFSA are not taxable and money withdrawn from it is tax-free, Vittoratos said.
“The catch of the TFSA is you don’t get that instant gratification of the tax reduction,” he said.
“The government doesn’t give you a tax reduction for the contributions you make, because when you withdraw they’re tax-free.”
Compared to the RRSP, a TFSA is more beneficial for lower-income people and also those looking to spend money in the short term, such as a purchase within the next three to five years.
“If it’s short term ,TFSA all the way. If it’s long term, RRSP is the way to go,” Vittoratos said.
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RRSP contribution deadline is on Monday. How much can you put in?
