When and how to contribute to your RRSP for maximum benefit

The tax year you contribute in can have a big impact on your overall tax savings. But contributing and deducting don’t have to happen at the same time.

If your income is lower this year but you have the funds available, consider contributing to your RRSP now to start tax-deferred growth sooner. You can then carry forward the deduction and claim it in a future year when your income is higher and the tax benefit is greater.

On the other hand, if you’re already in a high tax bracket, claiming the deduction now can provide immediate savings by reducing your taxable income.

The key is to balance early contributions for long-term growth with smart deduction timing for tax efficiency.

A large, lump-sum RRSP contribution isn’t always possible, but you can still build your savings over time in a way that works for your cash flow.

One option is setting up smaller, regular contributions throughout the year. This can make saving more manageable and help you avoid scrambling to find a lump sum before the deadline.

When it comes to tax-deferred growth, timing matters. If you contribute a lump sum early in the year, your money starts growing tax-free right away. But if you usually wait until the RRSP deadline to contribute, spreading out your contributions could actually get your money working in your RRSP sooner than it otherwise would have.

Even if you can’t contribute the maximum, small, consistent contributions can help you build long-term wealth.

A spousal RRSP can help couples reduce the tax they pay on withdrawals in retirement by shifting income to the lower-income spouse. The higher-income spouse makes contributions and gets the tax deduction, but the funds belong to the lower-income spouse. When the money is withdrawn in retirement, it is taxed in the name of the lower-income spouse, who may still have a lower taxable income, even in retirement.

Even after retiring, people can still have taxable income from different sources, such as RRSP withdrawals, pensions or investment income. If one spouse expects to receive more taxable income in retirement than the other, using a spousal RRSP allows withdrawals to be taxed at the lower-income spouse’s rate instead of the higher-income spouse’s rate. This can result in less tax paid overall, allowing more of the couple’s savings to go toward retirement expenses instead of taxes.

A spousal RRSP doesn’t increase the total amount a couple can contribute, but it can be a smart way to balance taxes between partners and help maximize retirement income.

If you haven’t already contributed the full amount to your RRSP at the start of the year, your tax refund can be a great way to top up your contributions and take advantage of tax-deferred growth sooner.

By reinvesting your refund, you create a cycle of reinvesting that helps grow your RRSP over time, keeping more of your money working toward your future.

The key to making the most of your RRSP is thoughtful planning and informed action. To see how much your savings can grow in an RRSP, use our RRSP calculator. The calculator lets you explore how contributions at different frequencies can compound over time.

If you need help, connect with a financial advisor to explore how your retirement goals and RRSP contributions fit with your other financial priorities. Every dollar you invest in your RRSP can help bring you closer to a secure financial future. Start today and make the most of this powerful tool for building your retirement savings.