Your RRSP (Registered Retirement Savings Plan) contribution room grows every year based on your earned income — 18% of last year's earned income, up to an annual dollar maximum ($32,490 for 2026). Unlike a use-it-or-lose-it system, unused room carries forward indefinitely, so if you didn't max out your contributions in previous years, that room is still available to you now.
You can check your exact accumulated room, including carry-forward amounts, on your CRA My Account or your most recent Notice of Assessment — this calculator estimates only the current year's new room based on the income you enter.
Every dollar contributed to your RRSP is deducted from your taxable income for that year. This means your tax savings equal your contribution multiplied by your marginal tax rate — the rate on the last dollar of income, combining both federal and provincial tax. Someone in a 33% combined marginal bracket saves $1,650 in tax on a $5,000 contribution; someone in a 20% bracket saves only $1,000 on the same contribution.
Contribution room: 18% of $65,000 = $11,700 (well under the $32,490 cap). A $5,000 RRSP contribution at a roughly 30% combined marginal rate generates an estimated tax refund of $1,500, with $6,700 of room remaining for the rest of the year.
Money inside an RRSP grows completely tax-deferred — you pay no tax on investment growth until you withdraw. A single $5,000 contribution left to grow for 25 years at a 6% average annual return becomes over $21,000, more than four times the original amount, entirely from compounding. The earlier you contribute, the more years of tax-deferred growth you capture.
RRSPs work best when your current tax bracket is higher than you expect it to be in retirement — you get the deduction now at a high rate, and pay tax on withdrawal later at a (hopefully) lower rate. TFSAs make sense regardless of your bracket since both growth and withdrawals are always completely tax-free, but contributions don't reduce your current-year taxable income. Many financial advisors suggest using RRSPs primarily during your highest-earning years and TFSAs more heavily early in your career or whenever your income is lower.