It's RRSP time!

Dawn Luhning |

Happy new year! And Happy RRSP season!

Here are some frequently asked questions about RRSPs:

When is the RRSP contribution deadline?

The deadline falls 60 days after the end of the year. Typically that date is March 1 each year. In a leap year, the deadline is February 29. If that last day is on a weekend, CRA has been known to extend the deadline to the next Monday.

How much can I contribute to my RRSP?

You can contribute up to 18% of your earned income to a maximum of $29210 in the 2022 tax year (minus pension adjustments from your company pension plan) in addition to unused contribution room from previous years.

How can I find out exactly how much I can contribute?

Your Notice of Assessment from the CRA will state your maximum contribution room for the current year. You can also call CRA at 1.800.959.8281.

What is considered "earned income"?

Earned income includes salary, self-employment income, taxable maintenance and alimony payments received, and net rental income. It does not include income from pensions or investments. You can speak to me to determine other sources of income that may be considered elgible.

What if I don't contribute my maximum amount?

If you don't contribute the maximum amount that you're allowed, you can carry forward the unused portion indefinately. Your Notice of Assessment will show your unused RRSP contribution room.

What if I contribute more than the limit?

Over-contributions are subject to penalty fees. Where over-contributions exceed $2000, you will be assessed a 1% / month penalty tax until the excess is withdrawn or additional contribution room becomes available.

What can I include in my RRSP investment portfolio?

You can hold mutual funds, equities, bonds, cash and a variety of other investments in your registered plan. 

What about foreign content levels?

The 2005 federal budget eliminated the foreign property limit for tax-deferred retirement plans. You are no longer restricted to holding up to 30% of foreign investments in your portfolio.

Is it a good idea to borrow money to invest in my RRSP?

Borrowing money to invest can be an effective way to maximize RRSP contributions. You should speak to me if you are interested in this strategy, to determine if it is right for you.

If my spouse and I decide to open a spousal RRSP, who makes the contributions?

The higher income earner normally makes the contributions on behalf of his or her spouse. The contributor, normally the higher income earner, would claim a tax deduction for the contribution, and withdrawals would be taxable to the lower income spouse (provided contributions have not been made in the year of withdrawal or previous two years.) Spousal RRSPs can still be effective in certain situations. We can chat if you need more information.

Can I withdraw from my RRSP?

You can withdraw from your RRSP but the amount you withdraw will be included in your income as fully taxable ordinary income. You will have to pay withholding tax when you withdraw. You might also have to pay addtional tax on the withdrawal when you file your tax return for the year with credit for any withholding tax previously withheld.

The government offers two programs where you can take money out of your RRSP without tax provided the amounts are re-contributed to the RRSP over time. The Home Buyers' Plan (HBP) lets a first-time home buyer withdraw up to $35000 for the purchase of a new home. The Lifelong Learning Plan (LLP) lets a student (or a spouse) withdraw $10000 per year up to $20000 to fund full-time education or retraining. Repayments under the HBP must occur over a 15-year period. Repayments under the LLP must occur over a 10-year period.

When does my RRSP mature?

You must wind up your RRSP by the end of the calendar year in which you reach age 71, typically by way of transfer to a Registered Retirement Income Fund (RRIF). However, you may convert to a RRIF at any time. 


* Information provided by Mackenzie Investments

If you have any other questions about RRSPs, please let me know.

See you before March 1 if you want to contribute for your 2022 tax year return!

~ Dawn