If you’re opening an RRSP for the first time, consider the pros and cons of different accounts to understand what suits you best. For example, some accounts pay interest on deposits or offer guaranteed investment certificates (GICs), while others allow you to invest in other financial instruments like stocks or bonds—more on that later in the article.
What are your 2024 and 2025 RRSP contribution limits?
Your RRSP contribution limit each year is the total of:
- Your unused RRSP contribution room from previous years.
- Plus, 18% of your earned income from the previous tax year (check your notice of assessment from the Canada Revenue Agency), or the annual maximum set by the government, whichever is less. For 2024, the annual maximum amount is $31,560, and for 2025, it’s $32,490.
If you’re not sure how much room you have, log into your CRA My Account or call the CRA at 1-800-959-8281.
Your RRSP room may be reduced if you belong to a defined contribution (DC) or defined benefit (DB) pension plan. Check the T4 slip issued by your employer at tax time to see your “pension adjustment” for the following year.
Here’s what else you need to know about how RRSPs work.
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EQ Bank RSP Savings Account
- Interest rate: Earn 2% on your cash savings. Read full details on the EQ Bank website.
- Welcome offer: Get a 2% match on new deposits before Feb. 28, 2025.
- Minimum balance: n/a
- Fees: n/a
- Eligible for CDIC coverage: Yes, for deposits
How does an RRSP work?
The RRSP was designed to help Canadians save for retirement. It has several benefits and incentives, including:
- The contributions you make (cash or investments) grow tax-deferred—you only pay income tax when you withdraw the funds in your retirement years, when you’ll likely be in a lower tax bracket.
- RRSP contributions are tax-deductible, meaning they can reduce your taxable income for that tax year (maybe leading to a juicy tax refund). Deductions can also be carried forward, if you anticipate a higher income in a future year.
- RRSPs can hold cash as well as certain qualifying investments, including stocks, bonds, guaranteed investment certificates (GICs), exchange-traded funds (ETFs) and other assets.
- Some RRSPs pay interest, helping your retirement nest egg grow. For example, EQ Bank’s RSP Savings Account pays 2% interest on cash savings. Interest is calculated daily on the total closing balance and paid monthly. (Note: The acronym may be one letter short, but EQ Bank’s RSP is an RRSP.) This account is currently offering a 2% match for new deposits made by Feb. 28, 2025. (EQ Bank’s RSP Savings Account is not available in Quebec.)
- You can contribute to your RRSP until Dec. 31 of the year you turn 71, giving you plenty of time for tax-deferred growth. By the end of that year, you must convert the RRSP to a registered retirement income fund (RRIF), cash it out or buy an annuity.
More benefits of RRSPs
- You can borrow up to $60,000 from your RRSP, penalty-free, to buy your first home, through the Home Buyers’ Plan.
- You can also borrow from your RRSP to pay for your education: up to $20,000 through the Lifelong Learning Plan.
Plan carefully to avoid contributing too much
Be careful about any RRSP overcontributions. If you overcontribute to your RRSP by more than $2,000, the CRA will charge you a penalty tax, typically 1% per month on the excess contribution for as long as it remains in your account.
How to open an EQ Bank RSP Savings Account
Opening an RRSP at EQ Bank is simple, and the process and experience are fully digital. Plus, if you open your plan by Feb. 28, 2025, you’ll qualify for a 2% match on new deposits.
