It’s that time of year when many Canadians start thinking about making a Registered Retirement Savings Plan (“RRSP”) contribution. The first question is usually “How much can I put in to optimize my tax benefit?”
As a reminder, the maximum contribution for 2025 is $32,490, calculated as18% of your earned income from 2024 , plus any unused RRSP room you’ve carried forward.
But just as important as how much you contribute is what you invest it in. This step is often overlooked, yet it plays a major role in your long-term results.
Before You Invest, Consider How an RRSP Actually Works
Many people buy investments for their RRSP without thinking through the tax implications. Here are a few important points to keep in mind:
1. Capital gains don’t matter inside an RRSP
Any growth inside a registered plan is ultimately taxed as pension income upon withdrawal. So the tax advantages of capital gains or dividends that exist in a non-registered account do not apply here.
2. Investment fees are not tax-deductible
If you’re paying fees on your RRSP investments, you can’t deduct them, unlike certain non-registered situations.
3. Capital losses don’t help you
If an investment drops in value, you can’t claim a capital loss against future gains.
4. If an investment goes to zero, your RRSP room is gone forever
This is one of the most overlooked risks. Contribution room does not reset if an RRSP investment fails.
5. Your RRSP converts to a RRIF
You must convert your RRSP to a Registered Retirement Income Fund (“RIFF”) by the end of the year you turn 71. Once an account has been converted into a RRIF you must start withdrawing a minimum amount each year, based on your age and the plan’s balance.
Because of how RRSP taxation works, fixed-income can be a highly effective match, especially for individuals looking for stability or predictable returns.
If you can acquire a fixed-income security yielding 8% to 10%, the outcome is:
For clients in the RRIF phase, this becomes even more important. High-quality, stable fixed income allows you to take your mandatory withdrawals without having to sell equity positions during market downturns, helping preserve your principal over time.
When most people hear “fixed income,” they think of traditional GICs paying modest returns. But today’s fixed-income landscape is far broader, with options such as:
Depending on the product, yields can range anywhere from 7% to 15%, providing an attractive alternative for those concerned about market volatility.
For many investors, these strategies offer a combination of higher yields, lower volatility, and more predictable cash flow, making them an excellent fit for registered accounts.
If you'd like to review whether these types of fixed-income or real-return investments make sense for your RRSP or TFSA, feel free to reach out to TAAG Wealth Management and Family Office.
We’d be happy to book a no-obligation 20–30-minute discovery meeting and walk you through the options that align with your goals.
Colin Keddy, RFP
Director of Family Office
