RRSP

This is a popular tax-sheltered retirement savings account for Canadians under 71 who have earned an income and filed a tax return to build RRSP contribution room. Can hold all types of investments including stocks, ETFs, bonds, and GICs. Each year, the amount you add to your RRSP can be claimed as a tax deduction to reduce your taxable income.

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What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is an account available to Canadian taxpayers who are 18 years of age or older, in which they can deposit pre-tax income, which isn’t taxed until the money is withdrawn. The money in this account can be invested freely, but there is an annual contribution limit.

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How much money can be deposited into an RRSP?

The RRSP annual contribution limits are based on several factors. Account-holders can contribute 18% of their previous year’s earned income, up to a maximum limit. In 2019, the maximum contribution limit is $26,500. Previous annual contribution limits are as follows:

RRSP Year and Limit:

2011: $22,450

2012: $22,970

2013: $23,820

2014: $24,270

2015: $24,930

2016: $25,370

2017: $26,010

2018: $26,230

2019: $26,500

2020: $27,230

2021: $27,830

These contributions are cumulative, so account-holders who have not deposited the full amount they were eligible to contribute in previous years will have the remaining amount carried into future years indefinitely, raising the maximum contribution limit. Additionally, account-holders can make contributions to both their own RRSP and their spouse or common-law partner’s RRSP, although this doesn’t allow double the contribution; the annual limit remains the same even if the contributions are spread between two accounts.

Contributions that are deductible in the current year must be put into the RRSP no later than 60 days after the end of the taxation year. For more information on RRSP contributions, see CRA Guide T4040.

What happens to your RRSP once you retire?

An RRSP matures when the account-holder reaches the age of 71. At this point all funds in the account must be moved. This money can be withdrawn, transferred to a Registered Retirement Income Fund, or used to purchase an annuity.

Withdrawing the entire sum of money in a single year is not recommended, as this often puts the account holder in a higher income bracket for that year. Individuals who have RRSP deduction room available after age 71 will be able to contribute to a spousal RRSP until the end of the year in which their spouse or common-law partner turns 71.

REGISTERED RETIREMENT SAVINGS PLAN

RRSP Solutions

Before you retire, consider all your future bills and financial goals to avoid potentially running out of money. The earlier you start saving the more secure your retirement will be .

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