RSP vs. RRSP: A product comparison guide
What you need to know as you plan for retirement.
Updated 
6 min. read
What is the difference between a Registered Savings Plan, a Retirement Savings Plan, and a Registered Retirement Savings Plan?
While each plan is related to saving for retirement and may sound similar, they are different. One of the realities of managing our personal finances is that the terminology or names of certain products and accounts can be confusing. Let’s start by tackling the difference between a ‘registered’ savings plan versus a ‘retirement’ savings plan, to help you make the most informed choice.
The difference between RSP vs RRSP accounts
The main difference between a Registered Savings Plan (RSP) vs a Registered Retirement Savings Plan (RRSP) account is that while both accounts can be used for saving for retirement, an RRSP provides account holders to contribute up to 18% of a previous year’s earned income ($33,810 maximum for 2026) in a tax-free account that can be shared between a spouse or common law partner.
You might have a Registered Pension Plan at your employer, and that too could be part of your retirement planning. So, when you see RSP, or ‘retirement savings plan’, it could refer to any number of accounts related to retirement planning.
We’ve already talked about the difference between ‘registered savings plans’ and ‘retirement savings plans’, and some people may call one or both ‘RSPs’. But perhaps even more common is the confusion between RSP and RRSP.
RSP and RRSP are two acronyms used interchangeably by pretty much everyone. Generally, people will use either term to refer to an RRSP account. But remember, while an RRSP is a type of RSP, an RSP is not always an RRSP. It’s like an apple being a type of fruit, but not all fruits are apples.
When it comes to investing, the three most popular account types are the RRSP, the TFSA, and the non-registered account (non-registered accounts also known as cash or margin accounts). This article will provide some basics on the RRSP, but you can learn more about TFSAs and non-registered accounts in the learning centre.
What is a Registered Savings Plan?
The Canadian federal government defines ‘registered’ as a plan that has been registered with the Canada Revenue Agency (CRA) because they have special tax rules. Not all registered plans are related to retirement planning. ‘Registered savings plans’ typically refer to the following:
- Registered Retirement Savings Plan (RRSP)
- Tax-Free Savings Account (TFSA)
- Registered Education Savings Plan (RESP)
- Registered Disability Savings Plan (RDSP)
What is a Retirement Savings Plan (RSP) account?
Retirement Savings Plans (RSPs) are a category of accounts geared towards the goal of providing you income during retirement. The most well-known of these accounts is the ‘Registered Retirement Savings Plan’, or RRSP. But there are others. You could use a Tax-Free Savings Account (TFSA) for retirement planning. You might convert your RRSP into a Registered Retirement Income Fund (RRIF) one day, and that’s also part of retirement planning. You might have a Registered Pension Plan at your employer, and that too could be part of your retirement planning. So, when you see RSP, or ‘retirement savings plan’, it could refer to any number of accounts related to retirement planning.
What is an RRSP account? (Registered Retirement Savings Plan)
The Registered Retirement Savings Plan (RRSP) is one of the most well-known ways for individuals to save and invest for their retirement and was created by the federal government in 1957. They became very popular because of the unique tax benefits. Let’s break down the major features of an RRSP.
RRSP contributions are tax deductible
When you make a contribution into an RRSP, you can claim those contributions as income deductions on your tax return. Effectively, that means you can reduce your tax burden. As an example, if you contributed $10,000 into an RRSP and your combined federal and provincial marginal tax rate was 40%, you could pay up to $4,000 less in income tax for the year. Because many Canadians have income tax contributions made from their paycheques throughout the year, after filing a tax return you could receive a tax refund.
RRSP investment income isn’t taxed while in the plan
In a cash or margin account, when you earn interest or dividends or sell investments with a capital gain, you have to pay tax annually. But with an RRSP your investments are allowed to grow on a tax-sheltered basis.
RRSP withdrawals are treated like income
While you get to deduct RRSP contributions from your income in the years you claim contributions, RRSP withdrawals are treated like income when you take them out of the plan. This can be advantageous when your marginal tax rate during your contributing years is higher than your marginal tax rate during your withdrawal years. For example, let’s say you make a $10,000 withdrawal and your marginal tax rate was 25%. This would result in $2,500 in income tax. The bigger the tax bracket difference between these two stages of life is (the contributing phase versus the withdrawal phase), the more attractive RRSPs will be for your retirement planning. You can learn more about RRSP withdrawals here.
Other features of RRSPs worth noting
Here are some key points that may be of interest:
- There are limits to how much money you can contribute to your RRSP which is generally based on 18% of your previous year’s pre-tax income (up to a maximum determined by the CRA)
- If you don’t use your contribution room, it carries forward (many Canadians have a lot of unused contribution room)
- You can take out a special loan from your RRSP to buy a home using what’s called the RRSP Home Buyers Plan (HBP)
- You can take out a maximum of $60,000 per person, or $120,000 for a couple if you both have the funds in your RRSP available for the Home Buyers Plan and you can repay it to your RRSP over 17 years (repayments start in two years and you have 15 years after that to pay it off)
- You can put the money in your RRSP into a wide range of investments such as mutual funds, exchange-traded funds (ETFs), GICs, and even individual securities if you like to trade on your own
Concluding Thoughts
Choosing the right account to save and invest for retirement is important. While RRSPs are the most common account for saving for retirement, more Canadians have also been using Tax-Free Savings Account for retirement planning as well. If you are stuck on deciding which account to open, you might want to look at this article comparing RRSPs to TFSAs.
TFSAs tend to be more flexible and have different tax features than RRSPs, but can be a great option if you’re not really sure which would be better. It might be better to get started investing in a TFSA now, and if you determine that an RRSP might be more advantageous later, it’s easier to adjust your plans than if you start the other way around. On the other hand, if your tax bracket is very high right now, an RRSP will start to look more attractive. Some people also find they are less likely to make withdrawals from an RRSP than they are from a TFSA.
While the basic terminology can feel confusing at first, by providing a break down of the various accounts used for retirement savings, you now have a solid understanding of the basics and can feel confident to open the right account for your goals.
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