Financial expert, Sandy Yong, is clearing up confusion around how contribution rooms work within both the TFSA and RRSP programs.
Hi Experts,
Thanks!
Trying to wrap my head around contribution room limits.
I just checked my CRA account the other day, and it says, “2025 RRSP deduction limit: $7,663 2026 TFSA contribution room: $28,765.”
Do RRSP limits refresh each year or stack up? Like, if I contribute $7,000 in 2026, will that mean my limit will be reduced by $7,000 next year? And how long can I contribute to my RRSP until I retire? Are we able to claim a tax deduction for the matching RRSP contributions my employer makes?
In terms of TFSAs, you can make catch-up payments any time, right? I read that the limit is $7,000 this year. Does that mean I can only contribute $7,000, or can I catch up to the $28,000?
Bailey, J.
Hi Bailey,
Kudos for being proactive and checking your contribution room for your investment accounts. I know it can be confusing to understand how it works. So, I’ll help to answer your questions below. Let’s also explore how you can optimize your savings and investments without breaking any Canada Revenue Agency (CRA) rules.
Registered Retirement Savings Plan
Do RRSP limits refresh each year, or do they stack up?
Registered Retirement Savings Plan (RRSP) limits stack up. That means any unused contribution room from previous years carries forward. Every year, you earn a new contribution room based on your income. So, if you don’t max out your RRSP contribution room, you can use it in the future.
If I contribute $7,000 to my RRSP in 2026, will my limit be reduced by $7,000 next year?
Yes, contributing $7,000 to your RRSP uses up your contribution room by that amount. Good news: if you earn money this year, you’ll have a new contribution room available next year. Thus, your overall contribution may still increase.
How long can I contribute to my RRSP until I retire?
As long as you’re earning money, you can contribute to your RRSP until December 31st in the year you turn 71. That’s because you’ll need to convert your RRSP into a Registered Retirement Income Fund (RRIF) within the year you turn 71.
Can we claim a tax deduction for the matching RRSP contributions my employer makes?
Yes, generally you can claim a tax deduction for your employer’s RRSP matching contributions. The contributions are added as income on your T4 slip. However, you should receive an RRSP receipt for that amount so you can claim it as a deduction when you file your taxes.
Tax-Free Savings Account
Can you make catch-up payments to your TFSA at any time?
Yes, if you have unused Tax-Free Savings Account (TFSA) contribution room from previous years, this amount carries forward forever. So, you can make catch-up payments at your leisure since there’s no deadline.
I read that the limit is $7,000 this year. Does that mean I can only contribute $7,000, or can I catch up to the $28,000?
Yes, this current year’s contribution limit is $7,000. Every year, the federal government in Canada sets a new contribution limit. That means, every year you’ll have a new amount that you can add to your existing contribution room. So, you can catch up to your personal limit of $28,000.
Contributing to your RRSP
If you earned income in the previous year, you can contribute up to 18% of your earnings to your RRSP. Remember, to contribute to the 2025 tax year, you have until March 2, 2026, to make your contribution. However, if you make an RRSP over-contribution, then you may face a penalty of 1% interest per month if it exceeds $2,000.
The benefit of contributing to your RRSP is that it helps to reduce your taxable income. So, you owe less tax to the CRA. Also, your contributions grow tax-free, and you’re only taxed when you make withdrawals.
Generally, the RRSP is meant to help you save towards retirement. In your golden years, most likely you’ll be in a lower tax bracket. This means the withdrawals you make will probably be taxed at a lower rate.
Contributing to your TFSA
To open a TFSA, you must be a Canadian resident, age 18 years or older and have a social insurance number (SIN).
For 2026, the contribution limit is $7,000. As of 2026, if you were 18 years old in 2009, the lifetime contribution limit would accumulate to $109,000. To calculate your lifetime contribution room, take the year you turned 18 and then add the annual contribution limits to get the total.
You can also check your contribution limit within your CRA account for individuals at Canada.ca. Be sure to double-check the contributions you’ve made with your financial institution to avoid an excess amount in your TFSA contribution limit. However, if you have unused contribution room from previous years, they carry forward. If you over-contribute to your TFSA, you may face penalties of 1% per month until you remove the excess amount from your account.
The advantages of a TFSA are that you invest your after-tax dollars, but the withdrawals and investments grow tax-free. Keep in mind that when you withdraw from your TFSA, those amounts can be added back to your account on January 1st of the following year. For example, if you decide to withdraw $1,000 from your TFSA anytime in 2026, you’ll have to wait until January 1, 2027, to add that amount back in.
The next steps to take
These are several tips to help you work towards your savings plan:
- Determine your financial priorities. Consider whether you want to focus on paying off debt, having an emergency savings fund, investing for retirement, or saving for a Registered Education Savings Plan (RESP). Some people choose to balance multiple goals simultaneously.
- Understand how you’ll use your TFSA vs. RRSP for different financial goals. For instance, you may want to use your TFSA for home renovations or to finance a car. In contrast, the RRSP is designed to fund your lifestyle in retirement.
- Use calculators and tools to support your financial planning. By entering your personal information, you can come up with a realistic plan of how you’ll make regular contributions to your investment portfolio. For example, you could take a portion of your paycheque and deposit money into your TFSA and/or RRSP throughout the calendar year.
- While you could let your money sit in cash within your registered accounts, it’s a good idea to put it to work with investment products. For example, consider investing in stocks, bonds, index funds, GICs, or ETFs that align with your financial goals.
If you’re juggling debt along with your investments, you may consider seeking professional advice from a Credit Counsellor. They can help create a customized debt-repayment plan tailored to your specific needs.
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