“You Retire Once… I Help People Retire Everyday”
As we enter into the heart of RRSP season, many investors find themselves revisiting this important question: "How can I make my RRSP work harder—not just for this year’s tax refund, but for my long-term retirement income?"
One of the most common (and costly) RRSP mistakes we see is focusing solely on maximizing today’s refund, without considering how taxes will apply when those savings are eventually withdrawn. A thoughtful RRSP strategy balances both.
RRSPs and Household Income: Why Balance Matters
For individuals with a single income, RRSP planning is relatively straightforward. If your income today is higher than what you expect in retirement, contributing to your RRSP often makes sense.
For couples, however, the decision is more nuanced. RRSP planning should be done at the household level, not in isolation. The goal is not only to reduce taxes today, but also to avoid creating a future imbalance where one spouse faces a much higher tax bill in retirement.
Consider a household where one partner earns significantly more than the other. While it may seem logical for each spouse to contribute equally to their own RRSPs, this approach can leave money on the table in the form of missed tax savings.
In many cases, directing a larger share of contributions to the higher-income spouse—or using a spousal RRSP—can produce a better outcome. This strategy allows the household to benefit from the higher marginal tax rate today, while helping equalize retirement income and reduce taxes later on.
A Practical Example
Imagine a couple in their mid-40s with no pensions and equal existing savings, but very different incomes and tax rates. They have $20,000 available to contribute this year.
Splitting contributions evenly can help balance retirement savings, but may result in a lower overall tax refund.
Contributing entirely to the higher earner’s RRSP maximizes the immediate refund, but risks creating a large imbalance—and higher taxes—in retirement.
Using a spousalRRSP often achieves the best of both worlds: a higher household tax refund today, while keeping retirement income more evenly distributed in the future.
The right answer depends on the full financial picture, but the key takeaway is simple: RRSPs work best when planned together, not separately.
Turning Today’s Savings Into Tomorrow’s Income
RRSP contributions can sometimes feel abstract—money set aside today for a benefit far in the future. But even modest, consistent savings can translate into meaningful retirement income over time, especially when combined with tax deferral and compounding.
Understanding this connection helps reframe RRSPs not as a tax exercise, but as a powerful income-building tool.
Common RRSP Questions, Answered
How do I check my RRSP contribution room?
Your most recent Notice of Assessment from the CRA outlines your available contribution limit. Alternatively, you can access this information by visiting your personal CRA portal. Be mindful that it may not reflect very recent contributions.
Do pensions affect RRSP room?
Yes. Pension benefits reduce your RRSP contribution room and should also be factored into your expected retirement tax rate.
Should I delay RRSP contributions if I expect higher income later?
In some cases, yes—particularly if you still have TFSA room and expect to move into a much higher tax bracket in the near future.
Is there a penalty for withdrawing from an RRSP early?
Withdrawals aretaxable and permanently reduce contribution room, but there is no additional penalty beyond the tax owed.
Final Thoughts
RRSPs remain one of the most effective retirement-building tools available to Canadians—but only if they’re used thoughtfully. Coordinating contributions, understanding future tax implications, and aligning RRSP strategy with household income can make a meaningfuldifference over time.
With the RRSP contribution deadline quickly approaching, March 2nd, now is an ideal time to review your strategy and ensure it aligns with both your short-term tax planning and long-term retirement goals.
