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Is Maxing Out RRSP Enough for Retirement?

Planning for retirement can be stressful, especially in an ever-changing world. You may wonder about the best way to save for the future. RRSPs are known as an essential saving tool, but are they enough to retire off of?

Depending on your retirement plan, maxing out your RRSP can be enough for retirement. Knowing your financial goals and maximizing your saving tools can help you prepare for the future.


A piggy bank with a  logo of a Canadian maple leaf with RRSP  written on it and coins stacks and a house on the background.

What Is an RRSP?

Registered retirement savings plans (RRSP) are a way to save money for retirement, whether you’re with a company or self-employed. The Canadian Government created RRSPs in the 1950s to assist retirement planning, helping pre-tax money grow tax-free until it’s withdrawn.

There are several types of RRSPs, including:

  • Individual RRSPs, owned by a single person

  • Spousal RRSPs, owned by one person and contributed to by their spouse

  • Group RRSPs, set up for employees

  • Pooled RRSPs, ideal for small businesses and self-employed individuals

Many people wonder about the best way to contribute to their RRSP and plan for the future, and many experts recommend setting up automatic withdrawals from your bank account each month.

How Does an RRSP Help You Save for Retirement?

RRSPs allow you to deduct contributions to your retirement savings from your yearly income, lowering your taxable income. A certain percentage of your income is saved from taxes, based on your tax rate.

You can use the money in your RRSP to invest. You have different investment options permitted with an RRSP, including:

  • Bonds

  • Mutual funds

  • Savings accounts

  • Mortgage loans

  • Income trusts

  • Foreign currency

  • Exchange-traded funds

  • Stocks

Your investment growth is tax-deferred, helping your savings grow. While you need to pay taxes on this money eventually, it isn’t until retirement when your tax rate is typically lower. Many people consider an RRSP essential for retirement planning and saving.

How Do You Contribute to an RRSP?

You can make RRSP contributions whenever you want, in cash or another form. It’s important to know your limits when contributing to your RRSP—there’s a certain amount of money you can add each year.

Your RRSP contribution limit is 18% of your earned income reported on your tax return the previous year, up to $30,780 in 2023. You can contribute more than your limit if you’d like, but expect to pay a 1% monthly tax penalty when you exceed your limit by over $2,000.

It’s generally recommended to max out your RRSP each year to reduce your taxes and increase your retirement savings.

When Can You Take Money Out of an RRSP?

You can take money out of your RRSP whenever you feel like it. However, it may not be the best for your taxes.

You must pay the deferred income tax on the money you withdraw at your tax rate. If you’re younger than 71, you also pay a withholding tax on the money.

A close-up of a  male hand putting a coin into a piggy bank.

Is Maxing Your RRSP Enough for Retirement?

It can be difficult to say if maxing out your RRSP is enough to retire. Someone’s cost of living can differ depending on their lifestyle.

Experts state that a good benchmark for retirement is to have 10 times your pre-retirement salary and plan to live on 80% of your pre-retirement annual income. This amount can vary from person to person.

When it comes to retirement, think about how you hope to live and what it will take to get there.

Future Cost of Living is Uncertain

The cost of living for the average Canadian is rising with time, tightening budgets and making it harder to save. House prices, food costs, and utilities have risen in the past few years. Statistics from the Government of Canada state that 3 in 4 Canadians feel that rising costs affect their ability to meet their daily needs.

Depending on your age, you may have a few decades before retirement, making it hard to predict the future cost of living. You may not need to use every money-saving tip available, but maxing out your RRSP and utilizing your TFSA can help you save for retirement.

Visiting a financial advisor can help ease any concerns and get you further ahead on your journey to retirement.

Plan Your Finances With an Expert

Nobody can see the future, but you can plan for it as best as possible with help from a financial expert. They can learn more about your finances and future retirement plans, recommending ways to save. You don’t need to navigate your finances alone—reach out today.

Contact Dehaan Private Wealth for help with your retirement planning.

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