Why RRSP’s: A Tried-and-True Strategy to Save for Retirement

John De Vincenzi, CIM, Senior Portfolio Manager

Expert Contributor RBC Wealth Management (John De Vincenzi)

Neighbours of Dundarave Feb 2026

There are many ways to save for retirement. Some Canadians have access to a retirement savings plan through their workplace. This type of plan allows you to make additional contributions, often with the benefit of matching contributions from your employer. For saving on your own, you basically have two options: registered and non-registered savings.

Registered savings plans

These plans are “registered” with the Canada Revenue Agency (CRA). That means that they receive certain tax advantages. But they may be subject to CRA rules around how much you can contribute each year, what you can invest in (mutual funds, ETFs, GICs, individual stocks and bonds), and how withdrawals will be taxed. Common examples include Registered Retirement Savings Plan (RRSPs) and Tax Free Savings Accounts ( TFSA ).

Many Canadians choose RRSPs to save for their retirement. Here’s why:

You can lower your income taxes.

RRSPs provide you with important tax advantages. First, there’s the immediate tax benefit of being able to deduct your RRSP contributions on your income tax return. The higher your marginal tax rate, and the more you contribute to your RRSP, the greater the tax benefit.

However, there are limits to how much you can contribute each year. For 2025, you can contribute 18% of the income you earned in the prior year, up to a maximum of $32,490 after any pension adjustments. If you have any unused contribution room from previous years, you can carry that forward to another year.

Also, any income and gains you earn on investments within your RRSP will grow tax-deferred until you withdraw from your RRSP or Registered Retirement Income Fund ( RRIF ) in retirement. At that point, all withdrawals are taxed as ordinary income at your marginal tax rate. There are still a few benefits here, though, because you may be in a lower tax bracket by the time you make those withdrawals than when you were working, and you may be able to use income-splitting strategies between spouses.

To discuss RRSP’s, I can be reached at 604-981-2306.

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