RRSP: The Only Guide You Need

2. RRSP: The Tax-Deferral Account

Full name: Registered Retirement Savings Plan

Contribution limit:

• 18% of your previous year’s earned income

• Up to $32,490 (2025)

• Plus any unused carry-forward room

What it actually is

An RRSP helps you delay paying tax until retirement, when your income (and tax rate) will likely be lower.

When you contribute, you receive a tax deduction, which lowers your taxable income today.
Your investments then grow tax-deferred until you withdraw them.

Why it’s powerful

Let’s say you made $80,000 this year.

• You contribute $10,000 to your RRSP

• Your taxable income drops to $70,000

• You may get thousands back on your tax return

That $10,000 then grows untouched until retirement, when you withdraw it and pay tax at whatever rate you’re in at that time.

Example

You’re 30, earning $90,000. You invest $15,000 into your RRSP in ETFs.
By age 65, it’s worth $120,000.

You’ll pay tax when withdrawing, but if your retirement income is $50,000 instead of $90,000, you’ll likely be in a much lower tax bracket.

RRSP is best for

• Higher-income earners looking to reduce taxes now

• People investing for long-term retirement

• Anyone with employer RRSP matching (free money you should always take)

The catch

Withdraw early and you’ll face withholding tax (10–30%), and the withdrawal is also added to your taxable income for that year.

So don’t treat an RRSP like an emergency fund. Once money goes in, only withdraw as a last resort.

3. FHSA: The New Kid on the Block

Full name: First Home Savings Account

Contribution limit:

• $8,000 per year

• Up to $40,000 lifetime

What it actually is

Introduced in 2023, the FHSA is a hybrid of a TFSA and RRSP, designed specifically for Canadians saving for their first home.

• Contributions are tax-deductible (like an RRSP)

• Qualifying withdrawals for a first home are tax-free (like a TFSA)

It’s genuinely the best of both worlds.

Example

You contribute $8,000, which lowers your taxable income just like an RRSP.
That $8,000 grows tax-free.

When you withdraw it to buy your first home, you don’t pay a cent in tax.

FHSA is best for

• Anyone who has never owned a home before

• Canadians planning to buy within the next 15 years

• Couples (each person gets their own $40,000 limit — $80,000 total)