RRSP Contribution Patterns of High-Income Canadians

RRSP Participation Rates for High Income Earners

Recent data show that high-income Canadians are far more likely to contribute to Registered Retirement Savings Plans (RRSPs) than those with lower incomes. In 2022, only about 21.7% of all tax filers made an RRSP contribution (down from 22.4% in 2021)​. However, participation rises dramatically with income level. Among Canadians earning between $200,000 and $499,999, roughly 66% contributed to an RRSP in 2022​. By comparison, barely 1.7% of those with incomes under $20,000 contributed. Even in the next tier up, 64% of earners in the $500,000 to $999,999 range and about 59% of those earning $1 million+ contributed to an RRSP​ according to Statistics Canada. While this reflects a clear trend suggesting that higher earners are much more likely to utilize RRSPs, there is still a significant percentage of Canadian high-income earners who are not utilizing their RRSP. 

Overall RRSP usage has been on a long-term decline. The slight uptick during the COVID-19 pandemic (when savings spiked) has reversed – 2022 saw a 3.4% drop in total RRSP contributions (to $54.2 billion) and a return to the pre-pandemic downward trend in participation​. In fact, the proportion of tax filers contributing to RRSPs has generally declined since 2008, after peaking in the mid-2000s​. Meanwhile, the median contribution among those who do contribute has gradually risen, reaching about $3,910 in 2022 (an all-time high)​. This suggests that while fewer people contribute now than a decade ago, those who do contribute are putting in larger amounts on average according to this website.

Maximizing RRSP Contribution Limits

High net worth individuals not only contribute more often – many maximize their RRSP room each year. The annual RRSP contribution limit is 18% of prior-year earned income up to a fixed cap (e.g. $29,210 for the 2022 tax year, $30,780 for 2023, and $31,560 for 2024). Canadians earning above roughly $175,000 already hit the dollar cap (since 18% of their income exceeds the limit), so anyone making $200K+ has the potential to max out the full allowable RRSP each year.

How many actually max out?

Among very high earners, a significant proportion do contribute the maximum. Statistics Canada data show that for tax filers with incomes $500,000 and up, the median RRSP contribution in 2022 was $29,210 – literally the maximum claimable amount for that year​ according to Wealth Professional. This implies at least half of people in these top income brackets fully utilized their RRSP room (many likely contributing the max). Even in the $200K–$499K income range, contributions are hefty – the median was about $21,740 in 2022​. While not everyone in this group maxed out, a sizeable share did contribute near the limit (the average contribution in this bracket was about $29,000, suggesting many hit the cap even as others contributed less). By contrast, most average Canadians do not max their RRSP each year. Surveys have found only about 13% of Canadians consistently hit their RRSP limit annually​, and an Edward Jones poll in early 2024 showed just 21% planned to contribute the maximum for the year​.

Consequently, unused RRSP room has ballooned – as of 2018, total unused RRSP contribution room was estimated above $1 trillion nationwide, indicating that the majority of Canadians leave tax-sheltered capacity on the table. High-income individuals are the exception to this trend: they are much more likely to use their full RRSP deduction limit each year despite more than 1 third of higher income brackets not contributing at all.

Incorporated Business Owners and RRSP Strategies

A special segment of high earners is incorporated professionals and business owners. These individuals can choose how to pay themselves (salary vs. dividends), which affects RRSP contributions. Many incorporated business owners historically have retained earnings inside their corporations instead of drawing a salary to invest personally. In a CIBC poll of Canadian small business owners, 87% reported holding excess profits in their corporation, and more said they would invest surplus funds in a corporate investment account (27%) than contribute to an RRSP (only 21% would use a personal RRSP; an additional 11% favoured a spousal RRSP). This suggests that on the surface many business owners under-utilize RRSPs, preferring corporate savings or other uses for extra cash (e.g. using additional cash to reinvest in the business or to purchase investments inside the corporate structure).

However, tax planning experts often advise incorporated professionals to pay themselves enough salary to maximize RRSP contribution room and encourage making those RRSP contributions. By taking at least the salary required to generate full RRSP room (approximately $180,000 of salary is needed to create the ~$30K contribution room in 2025), business owners can then contribute that amount to an RRSP and benefit from tax-deferred growth​. This strategy can be more beneficial in the long run than keeping all investments inside the corporation, due to the RRSP’s tax sheltering. Indeed, small business owners appear to recognize the value of RRSPs for retirement: nearly 70% of entrepreneurs have an RRSP (vs about 55% of regular employees)​, and historically around 40% of small business owners make RRSP contributions in a given year (as of the early 2000s)​.

In short, while some incorporated high earners opt to invest via their companies, many do take advantage of RRSPs. The key is that an incorporated individual must draw a salary (not just dividends) to create RRSP room ​– a planning consideration that salaried high-income employees don’t need to worry about. Advisors often work with business owners to strike a balance, ensuring they maximize RRSPs if advantageous while using corporate accounts and TFSAs for additional retirement savings.

We here at Canadian Wealth Secrets do encourage incorporated business owners taking regular income from their corporation to strongly consider a salary instead of a dividend to create RRSP contribution room, we are very particular about when an incorporated business owner may or may not take out additional funds from the corporation with the intention to fund the RRSP. Instead, the vast majority of after corporate income tax net operating income (known as retained earnings) should remain in the corporate structure as a means to defer taxes for most – especially those whose annual net operating active income is below $500,000. For those incorporated business owners whose operating companies have annual net operating income above $500,000 and require approximately $135,000 or more in personal income per year should be considering the use of a salary to create RRSP room. Since any net operating active income above $500,000 will be taxed at the higher corporate income tax rate, expensing a salary can make sense while also creating additional RRSP contribution room.

Incorporated Business Owner Seeking Wealth and Tax Planning Support?

Reach out for a discovery call here.

Design Your Wealth Management Plan

Crafting a robust corporate wealth management plan for your Canadian incorporated business is not just about today—it's about securing your financial future during the years that you are still excited to be working in the business as well as after you are ready to step away. The earlier you invest the time and energy into designing a corporate wealth management plan that begins by focusing on income tax planning to minimize income taxes and maximize the capital available for investment, the more time you have for your net worth to grow and compound over the years to create generational wealth and a legacy that lasts.

Don't wait until tomorrow—lay the foundation for a successful corporate wealth management plan with a focus on tax planning and including a robust estate plan today.