RRSP Season Is Here
As February winds down, so does one of the most important windows in the Canadian tax calendar. RRSP season is officially in full swing, and the February 28 contribution deadline is fast approaching. If you are looking for ways to reduce your taxable income while building long term retirement savings, this is one deadline you do not want to miss.
Whether you are new to Registered Retirement Savings Plans (RRSPs) or simply need a refresher, here is what you need to know about how RRSPs work, the types of accounts available, and why contributing before the deadline can make a meaningful difference.
How an RRSP Works
An RRSP is a registered investment account designed to help Canadians save for retirement in a tax efficient way. The key benefit is simple but powerful: contributions you make to your RRSP are tax deductible.
Here is how it works in practice:
You contribute money to your RRSP.
That contribution reduces your taxable income for the year.
Investments inside the RRSP grow tax deferred.
You pay tax later when you withdraw funds, typically in retirement when your income and tax rate may be lower.
For example, if your income is $90,000 and you contribute $10,000 to your RRSP before the deadline, you may only be taxed as if you earned $80,000. This can result in a meaningful tax refund, depending on your marginal tax rate.
Your RRSP contribution room accumulates each year based on your earned income, up to the annual limit set by the government. If you have unused room from prior years, you can still use it.
Types of RRSP Accounts
One of the biggest misconceptions is that an RRSP is a single type of investment. In reality, an RRSP is a container that can hold many different types of investments. The right structure depends on your goals, time horizon, and comfort with risk. Here are the most common RRSP account types:
Individual RRSP
This is the most common option. You contribute using your own contribution room, and the account is registered in your name. Withdrawals in retirement are taxed in your hands.
Best for: Individuals saving independently for retirement.
Spousal RRSP
A spousal RRSP allows the higher income spouse to contribute to an RRSP in the lower income spouse’s name. The contributor gets the tax deduction, but withdrawals in retirement are taxed to the spouse who owns the plan (subject to attribution rules).
Best for: Couples looking to split retirement income and reduce overall household taxes later in life.
Self Directed RRSP
With a self directed RRSP, you choose and manage your own investments. This could include mutual funds, ETFs, GICs, or individual securities.
Best for: Investors who want control and flexibility over their investment choices.
Managed RRSP
In a managed RRSP, a financial institution or advisor selects and manages investments on your behalf based on your risk profile and goals.
Best for: Investors who prefer a hands off approach.
Why the February 28 Deadline Matters
The RRSP deadline is not just another date on the calendar. Contributions made on or before February 28, 2026 can be applied to your 2025 tax return. Contributions made after that date will count toward your 2026 taxes instead. Here is why contributing before the deadline is worth serious consideration:
1. Immediate Tax Reduction
An RRSP contribution directly lowers your taxable income. This can:
Increase your tax refund
Reduce taxes owing
Potentially move you into a lower tax bracket
For many Canadians, this is one of the most effective ways to manage taxes.
2. Accelerated Tax Deferred Growth
The earlier money enters your RRSP, the longer it has to grow tax deferred. Even a single year of additional compounding can make a noticeable difference over time. Waiting until after the deadline means losing a full year of potential tax sheltered growth.
3. Catch Up on Unused Contribution Room
Many people carry forward unused RRSP room from previous years. RRSP season is a great time to review your Notice of Assessment and see whether you have room available. Using that room strategically can create a larger than expected tax refund.
4. Opportunity to Reinvest Your Refund
A common strategy is to contribute before the deadline, receive the tax refund, and then reinvest that refund into your RRSP or TFSA. This creates a powerful savings loop that can significantly boost long term wealth.
As the deadline approaches, here are a few pitfalls to watch for:
Overcontributing: Always confirm your available RRSP room to avoid penalties.
Waiting until the last minute: Processing times can vary, especially with transfers.
Focusing only on the refund: The goal is long term retirement planning, not just a short term tax win.
Ignoring spousal planning opportunities: Couples often miss valuable income splitting strategies.
RRSP season is one of the most valuable planning windows of the year. A well timed contribution before the February 28 deadline can reduce your tax bill today while strengthening your retirement plan for the future.
If you are unsure how much to contribute, which type of RRSP makes the most sense, or how it fits into your broader financial plan, this is the perfect time to review your strategy. A thoughtful approach now can pay dividends for decades to come.