Your RRSP Contribution Could Be a Mistake, or Your Smartest Move

You may have seen the headline and thought, ‘What do you mean I shouldn’t contribute to my RRSP?’ In reality, for many Canadians, contributing is one of the best financial moves they can make—but only if it fits their income, their tax bracket, and their long-term goals. The trouble is that most people contribute without actually knowing whether it helps them or not. With the RRSP deadline on March 2, 2026, now is the perfect time to understand whether an RRSP contribution is smart for you, or if your money might be better invested elsewhere.

My name is Derek Seely, PhD., and I provide Wealth Management and Investment Advice at RBC Dominion Securities for individuals, families and businesses in Ottawa.  One of the best parts of my job is that no two days, and no two families are the same, everyone requires personalized and unique financial guidance.  I often hear the question “Should I contribute to my RRSP this year?” The Answer is never a simple yes or no.  I’m going to be writing to you regularly on financial topics ranging from the popular to the obscure.  If you have any questions about this article, would like to discuss your unique financial circumstances or have recommendations for future articles please reach out to me at derek.seely@rbc.com or call me at or (613) 721 4644.

RRSP Deadline Is Coming: Should You Contribute This Year?

Every year, many Canadians wonder the same thing: “Should I put money into my RRSP?”

The answer depends on your income, your goals, and whether you want to reduce your tax bill for 2025. With the RRSP deadline on March 2, 2026, now is the perfect time to look at your options—before the window closes.

What an RRSP Really Does (in plain language)

An RRSP is simply a government-approved retirement savings account that helps you save for your retirement by transferring income you earn now to the future when you retire.

Here’s how it works:

• You get a tax deduction now.
• This lowers your 2025 taxable income—which can mean a smaller tax bill or a larger refund.
• Your money grows tax-free.
• Investments inside your RRSP aren’t taxed until you take them out years later.
• You decide when to withdraw.
• Most people wait until retirement, when their income (and tax rate) is usually lower.

Why an RRSP Can Be a Smart Move

Even small contributions can make a difference over time due to the tax-deferred compounding— your money grows, year after year, without the drag of annual taxes.

Other benefits include:

• You can carry unused contribution room forward indefinitely – useful if you expect to earn more in future years.
• Income-splitting opportunities in retirement, especially once your RRSP becomes a RRIF.
• Creditor protection, which can help safeguard your savings in a bankruptcy scenario.

But RRSPs Aren’t Perfect for Everyone

Before you contribute, it’s important to know the limitations:

• Withdrawals are taxed as income and the contribution room does not come back.
• Not ideal for short-term savings like vacations or big purchases.
• Mandatory withdrawals start at age 71.
• RRSP income can affect benefits like Old Age Security, resulting in OAS being clawed back from you.
• When you pass away, the RRSP is generally fully taxable in that year, unless it goes to a spouse or certain dependents, which can result in a huge dent to your estate.

The Key Question You Need to Answer: What’s Your Tax Rate?

RRSPs work best if:

• You pay higher taxes now, and
• Expect to be in a lower tax bracket later.

If your income is modest or if you expect to receive a defined benefit pension, a TFSA may give you have more flexibility and may be a better first choice.

Think About Your Time Horizon

• RRSPs shine when you leave contributions invested for many years, allowing compounding to do the heavy lifting.
• If you’re saving for retirement or for programs like the Home Buyers’ Plan or Lifelong Learning Plan, an RRSP can be a powerful tool.
• If you may need the money sooner—or if you think you might move outside Canada later—an RRSP may not be the best fit.

So… Should You Contribute?

There’s no one-size-fits-all answer. But here’s an easy rule of thumb:

• If you want to reduce your 2025 taxes and you expect to earn less in retirement, an RRSP contribution is usually a smart move.
• If you’re unsure, now is the time to review your personal situation before the March deadline.

Want help deciding? Let’s talk.

Everyone’s financial picture is different. A quick conversation can help you understand whether contributing this year makes sense—and how much to contribute.

This article is for general information only and may not fit your individual tax or financial circumstances. Please consult a qualified professional before making decisions.