Thinking of starting a Registered Retirement Savings Plan (RRSP)?

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Starting an RRSP, start a Registered Retirement Savings plan today.

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What is a Registered Retirement Savings Plan (RRSP)? 

A Registered Retirement Savings Plan (RRSP) is a tax-advantaged retirement savings plan that is established by you and is registered by the government. You contribute to the RRSP throughout your life and once you retire you convert it to a Registered Retirement Income Fund, purchase an annuity or make a lump-sum withdrawal to access your savings. You can also make withdrawals from your RRSP to purchase your first home or for education.

RRSPs are an essential part of a secure retirement, and are extremely beneficial to young adults who are beginning to save for retirement and for those who are nearing their retirement!

Maximum RRSP contribution limit for 2021 and 2022

What are the benefits of having a Registered Retirement Savings Plan (RRSP)?

A RRSP can be a great savings account for those who are trying to save for more than just retirement.

RRSP Contribution room
RRSP Maximize Tax Deductions
RRSP Save for Your First House
RRSP Save for Your Education

How does a Registered Retirement Savings Plan (RRSP) work?

A RRSP is a retirement savings account, this account has tax-deferred benefits which can be used to hold investments and you will not be taxed on the income earned as long as the income earned remains in the account. The contributions that you make to your RRSP are tax-deductible. There is a yearly RRSP contribution limit, for 2022 the maximum contribution limit is $29,210, and for 2021 the maximum contribution limit was $27,830. The maximum contribution limit can also be capped at 18% of your income, or the yearly contribution limit, whichever is lower. Additionally, there is also the carried over contribution room if you haven’t contributed the full yearly amounts throughout the years.

What is the difference between a LIRA, a RRSP and a TFSA?

LIRA

(Locked-In Retirement Account)

RRSP

(Registered Retirement Savings Plan)

TFSA

(Tax-Free Savings Account)

What kind of savings account is it?
  • Retirement savings account
  • Retirement savings account
  • Savings account
How to start the account?
  • Must be a Canadian resident
  • Must be 71 years old or under
  • Have an income
  • Contact us
How does tax affect this account?
  • Money won’t be taxed until it is withdrawn
  • Money won’t be taxed until it is withdrawn
  • Tax deductible to a certain limit
  • Money won’t be taxed when withdrawn
When can you withdrawal your money?
  • When you retire and turn the account into a retirement income account
  • Can make withdrawals anytime but they are taxable, and withdraw rules vary depending on type of account and legislation
  • Anytime
How to contribute?
  • Cannot make contributions but can transfer funds from another locked-in account
  • Annual contribution limit, 2022 contribution limit is $29,210
  • Contribution amount changes yearly, 2022 maximum contribution amount is $6,000
What happens to the account when you retire?
  • Turn account into a retirement income account by the end of year that you turn 71 years old
  • Turn account into a retirement income account by the end of year that you turn 71 years old
  • Continue to contribute to the account

Frequently Asked Questions (FAQs) About Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan (RRSP) is a tax-advantaged retirement savings plan that is established by you and is registered by the government. You contribute to the RRSP throughout your life and once you retire you convert it to a Registered Retirement Income Fund to withdraw your income. RRSPs are an essential part of a secure retirement, and are extremely beneficial to young adults who are beginning to save for retirement and for those who are nearing their retirement! 

  • Income that is made in the RRSP through investments such as ETFs, mutual funds, stocks, bonds, and GICs are tax-deferred as long as the income remains in the RRSP account. 
  • The tax-advantaged portion of the RRSP is where the savings occur, year to year prior to your retirement. Any contribution made to your RRSP is tax-deductible, meaning that the contributions you make can reduce the amount of taxes you pay on the current year tax return.
  • Your RRSP contribution room can be moved over to future years, or if it is unused. This is especially helpful to reduce taxes during your tax return. 
  • The RRSP account can be used by couples to reduce their individual taxes as well. For example, if you make more income than your spouse, you can contribute to their RRSP which will reduce the amount of taxes that you pay. 
  • You can withdraw money from your RRSP account without getting taxed immediately if the amount withdrawn is used towards purchasing your first home under the Home Buyers Plan.
  • You can withdraw money from your RRSP account without getting taxed if the amount withdrawn is used towards your education under the Lifelong Learning Plan. 

An RRSP is a retirement savings account, this account has tax-deferred benefits which can be used to hold investments and you will not be taxed on the income earned as long as the income earned remains in the account. The contributions that you make to your RRSP are tax-deductible. There is a yearly RRSP contribution limit, for 2022 the maximum contribution limit is $29,210, and for 2021 the maximum contribution limit was $27,830. The maximum contribution limit can also be capped at 18% of your income, or the yearly contribution limit, whichever is lower. Additionally, there is also the carried over contribution room if you haven’t contributed the full yearly amounts throughout the years.

The main reason why you should have an RRSP account is to save for your retirement, but the other great reason to have an RRSP account is to have the amount you contributed to your RRSP be deducted from your annual income for tax purposes.

  • Individual RRSP: The most common type of RRSP that you set up for yourself and make regular contributions to. 
  • Self-directed RRSP: This is an RRSP where you invest the savings by yourself or with a broker. This is for people who are willing to take more risk with their retirement savings as they have more personal control over their investments.
  • Group RRSP: Group RRSP are created by employers, they are basically a collection of individual RRSP’s. You can choose to be enrolled in the group RRSP if your employer offers this option and you will have your contributions toward this RRSP deducted from your taxable income (your paycheque) immediately.
  • Spousal RRSP: If you make a spousal RRSP, by contributing to the spousal RRSP, you will get you the tax deduction but the plan is registered in your spouse’s name therefore they are entitled to the accumulated savings.

The Tax-Free Savings Account (TFSA) can hold various investment benefits, such as cash, stocks, bonds, GICs and mutual funds, the growth of which will not be tax-deductible. Any contribution or any income earned in the account is generally tax-free, even when it is withdrawn.

A Locked-In Retirement Account (LIRA) is an account meant for those who have an employee pension plan and leave their job. You have the option of transferring your pension plan savings into a LIRA, but you will not have access to the funds until you retire, hence it is locked-in. 

A Registered Retirement Savings Plan (RRSP) is a tax-advantaged retirement savings plan. You contribute to the RRSP throughout your life and once you retire you convert it to a Registered Retirement Income Fund to withdraw your income. The RRSP has plenty of tax-deductible benefits and tax-advantages. 

Anyone who is a Canadian resident can open an RRSP, meaning anyone from 0 to 71 years of age. Some financial institutions do require you to have an income and have filed a tax return.

You can contribute to an RRSP until the end of the year of your 71st year. You then can transfer your RRSP savings to a RRIF or purchase an annuity. 

Most people access their RRSP when they retire or are nearing retirement, but truthfully you can access your RRSP whenever you want. There will be a tax penalty if a lump-sum withdrawal occurs, rather than letting the account mature when you’re 71 years old, or if you don’t convert it to an RRIF, or annuity when you retire.

In this case, your RRSP contribution limit will be reduced based on the amount of your employee-sponsored pension. The pension adjustment can be found on your T4. 

There are some tax issues that you will most likely face if you withdraw from RRSP prior to maturity (when you’re 71 years old) or if you don’t convert it to an annuity or a RRIF. It is important to contact a financial advisor to find out what is the best course of action for you to make a smart decision when withdrawing from your RRSP.

The contribution limit in 2022 is $29,210 and the contribution limit in 2021 was $27,830. Alternatively, the maximum amount you can contribute is 18% of your income or the maximum contribution amount, whatever is least. 

Yes, your RRSP contributions are tax-deductible meaning that you can deduct your contribution amount when you file your taxes. 

It is okay if you can’t or don’t contribute the full amount each year in your RRSP, because you can carry over your contribution room into the next year, and to future years since there is unused contribution room. 

The younger the better, but even with that being said, it is better late than never. Being that anyone from 0 to 71 years old can make an RRSP, it is best to talk to a financial advisor and see if starting a RRSP is a good decision for you. 

Up to 18% of the past year’s pre-tax income or the maximum contribution amount stated by CRA, in 2022 the maximum contribution limit is $29,210 and the maximum contribution limit in 2021 was $27,830. 

There are 3 options when withdrawing your money from your RRSP, you can withdraw it in cash, convert it into an RRIF, or buy an annuity.

  1. You can withdraw all the money in your account as you wish, but taking out a lump sum in cash will lead to the lump sum amount being taxed heavily. 
  2. Converting it into an RRIF will allow you to continue to save your money and allow for growth as well. The RRIF is also tax-deferred and you must withdraw a certain amount from the RRIF per year, if you withdraw more than the specified amount you will be taxed. 
  3. If you decide to buy an annuity, you will be provided with income for life, or until the age 90 years old. You will be taxed upon receiving the payments.

Yes, under the Home Buyers Plan you can use up to $25,000 from your RRSP to purchase your first home and your spouse can also use up to $25,000 for purchasing your first home as well. This being said, you must pay back the amount you borrowed within 15 years, or you will be taxed on the amount that you withdrew.

Yes, you can use your RRSP towards your education with the Lifelong Learning Plan. This plan allows you to withdraw $10,000 per year up to a maximum of $20,000. Similarly to the Home Buyers Plan, you will be required to pay this amount back within a certain time, and or you will be taxed on the amount you withdrew. 

The spousal RRSP is a beneficial way for couples to save for their retirement, while also reducing the tax impacts due to their income. A spousal RRSP can operate separately from your own and your partner’s individual RRSP accounts. This spousal RRSP is ideal for couples who don’t make the same income annually. This helps the couple make contributions while reducing the amount of tax liability and evening out the amounts in their RRSPs, but remember that individuals are still only allowed a total contribution room of 18% of their income or the amount specified by the CRA, this amount does not change even if you contributed to your spouse’s RRSP. 

For example: Partner A makes $100,000 per year and partner B makes $50,000 a year. Partner A can contribute up to $18,000 to their RRSP yearly, and Partner B can contribute up to $9,000 yearly. Partner A contributes $14,000 to their personal RRSP, and $4000 to Partner B’s RRSP, and Partner B puts in the $9,000 to their own account, then Partner A can still claim a total of $18,000 in tax-deductions, while it also levels it out for both partners so they have a similar amount in their RRSPs for when they retire. This levelling of account contributions is crucial once they retire, as the disparities can be large when receiving payments from their retirement savings. The way this works is simple, but it is strongly recommended to talk to a financial advisor to figure out how to best manage a spousal RRSP. 

Benefits of Spousal RRSP

The RRSP contribution deadline is typically 60 days after December 31st, therefore it is usually on March 1st and sometimes on March 2nd. This deadline is important because any contributions made after this deadline cannot be deducted from your income until the following year. 

If you contribute $2,000 over the maximum amount in your RRSP that is considered an over contribution. You will be penalized 1% per month that the over contribution is in your RRSP. To fix this, you can pay the penalty, you can withdraw the over-contribution amount if it was an honest mistake, or you can prove that the over-contribution is because you have unused room in your RRSP. 

You can list a beneficiary to receive your RRSP savings when you die, there are some tax rules surrounding who the beneficiary is and how they receive the RRSP amount. 

The 5 Steps of Successful Financial Planning

An overview of 5 wealth-planning steps Protect Your Wealth takes that results in a strong financial future.

1.

Gather and Analyze

At Protect Your Wealth, we will work with you to create an accurate overview of your present financial situation. Using state-of-the-art software, we will complete a thorough needs analysis to assess your present expenses and project future ones while accounting for inflation. We also perform a detailed risk assessment to help ensure that you are not taking more risk in your investments than necessary.

2.

Develop Your Blueprint for Success

After carefully considering all aspects of your finances and identifying ways to maximize tax efficiency, we will recommend an efficient retirement savings plan that tallies with your investment goals. You will receive a personalized Investment Policy Statement that summarizes our findings and recommends appropriate risk-managed investment options.

3.

Strategize and Implement Your Plan

After you approve your Investment policy statement, we will present you with a Financial Planning Priorities and Strategies document outlines your financial planning priorities and your personalized wealth-building strategies that meet both your short, and long-term financial goals. Once you review and approve your plan, it will be implemented. It is important to note that this document will change over time to ensure that it always reflects your current circumstances and complies with any changes in government policy.

4.

Forecast Your Financial Future

We use a cash flow planning analysis to create a financial forecast of your future. This analysis calculates projected outcomes, which lets you consider the consequences of financial decisions before you make them and create a stronger plan for future commitments like a child’s college fund. These forecasts are reviewed every year as your situation changes.

5.

Ongoing Monitoring and Management

Financial planning is a continuous process. To ensure that your investment needs continue to be met, we will remain in regular contact with you throughout the year and hold a yearly review to assess progress, make adjustments for changed circumstances, and evaluate promising new strategies. These meetings may be held in our office, by phone, or via Zoom.

Are you still wondering if a Registered Retirement Savings Plan (RRSP) is right for you?

A RRSP is one of the most crucial parts of a strong financial plan. Connect with one of our advisors to determine if it’s the right type of investment for you.

Financial institutions we work with