Retirement Savings

Reduce Taxes Now

How contributing to an RRSP defers your taxes

  • RRSP contributions can defer and potentially lower the amount of income tax you pay.
  • Individuals can enjoy immediate tax savings because an RRSP allows you to deduct from your net income on your tax return the amount of the contributions made in the same tax year and/or the first 60 days of the following year.
  • Later, when you withdraw the money from a RRIF and pay income tax on it, you’re likely to be in a lower tax bracket than today.

Example – $5,000 RRSP contribution made at different marginal tax rates

The actual cost of the contribution is reduced because of lower taxes.

Marginal tax rate1 32% 39% 46%
RRSP contribution $5,000 $5,000 $5,000
Reduced taxes $1,600 $1,950 $2,300
Actual cost of contribution2 $3,400 $3,050 $2,700

1Source: Canada Revenue Agency; this is a hypothetical example to be used for illustrative purposes only.
2Excludes taxes to be paid upon withdrawing the money from the RRSP (e.g. RRIF).