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What you need to know about the 2025 RRSP contribution limit
For many Canadians, Registered Retirement Savings Plans (RRSPs) have become a go-to way to build their financial security for life after work – and for good reason. RRSPs can be used to increase your tax savings on your income each year, while providing tax-deferred growth on your investments within the account.
Still, while an RRSP is a great savings tool, you have to be aware of your contribution room limit, which can fluctuate from year to year. Here’s a look at how RRSPs work and the contribution limit for 2025.
How RRSPs can help you plan for retirement
Remember, some of those deductions you see on your paycheques are essentially prepayments of what you owe the government come tax season. When you contribute to your RRSP, your taxable income decreases, meaning that some of the tax you’ve already paid may be returned to you, which could result in a refund.
But the income tax is deferred, not waived altogether. So when you eventually withdraw your retirement savings, you will pay income tax at that time. Not only does this mean your money can grow tax-deferred, but if you’re in a lower tax bracket when you start to draw down your savings – as is the case for many Canadians – then you’ll also pay less tax on that income when you retire.
If there is a big difference between your and your partner’s earnings, then contributing to a Spousal RRSP (SRRSP) could be an option. When the higher-earning spouse or common-law partner makes contributions to an SRRSP, the contribution is deducted from that individual’s taxable income, while withdrawals (usually in retirement) are taxed in the hands of the spouse, who will likely be in a lower tax bracket. The main benefit of these accounts is that they combine the tax-deferring advantages of an RRSP with income splitting, which can lower your household tax bill.
The 2025 RRSP contribution limit
Every year, the Canada Revenue Agency (CRA) sets a limit for how much money you can deduct from income taxes through RRSP contributions. For 2025, the limit is 18% of your annual taxable income to a maximum of $32,490; that’s up from $31,560 in 2024 and $30,780 in 2023. Just note that your contribution limit might be lower if you are a member of a registered pension plan through your employer.
You can also carry forward any unused RRSP contribution room from previous years, meaning that if you didn’t use all your contribution room in any previous year, it will get added to your contribution limit for this year. The CRA tracks your personal contribution limit and will include that information on the Notice of Assessment you receive after filing taxes. You can also look it up in your online CRA account.
Just be careful not to go over your contribution limit, because doing so can trigger a penalty. The CRA will forgive a lifetime over-contribution total of $2,000, but anything above that amount will be subject to a penalty of 1% per month.
How to maximize your contributions
There are several strategies you can use to maximize your tax savings through RRSP contributions. One approach is to take advantage of any free money your employer might offer through RRSP matching contributions.
Automating your savings by scheduling the money to come out of your account when you get paid is another way to boost contributions. This takes the pressure off remembering to save or trying to find money to contribute at the contribution deadline.
Since the benefits of an RRSP rise as your income increases, consider increasing your contributions with every pay raise. Likewise, steering a portion of any extra income you receive from bonuses – or your tax refund – back into your RRSP will help you get a bigger bang for your buck.
Investing in your RRSPs
Once you contribute money to your RRSP, you still need to invest it so that you can take advantage of the tax-free compound growth to help reach retirement savings goals faster.
There are several kinds of investments that can be held within an RRSP, including mutual funds, ETFs, stocks and bonds. One notable exception is cryptocurrencies. While you can’t own cryptocurrencies directly in an RRSP, Fidelity and other fund providers now make this emerging asset class available through an ETF, which can be held inside an RRSP.
Whether you’re working with an advisor to help you manage your retirement investments or managing your accounts on your own, Fidelity offers many investments to help you achieve your goals.
