RRSP

RRSPs are one of the best known retirement savings products on the market for Canadians. RRSPs allow for the accumulation of savings without having to pay income tax until the funds are withdrawn. Contributions made to the plan are deducted from income which also helps to reduce your taxes payable in a given tax year. RRSPs do have contribution limits annually based on your income as well as carry forward from prior years when the maximum contribution wasn't used by the individual. 

Question: RRSP contribution limits - How much can I invest in my RRSP every year?

Answer:     As a general rule, it is the lesser of 18% of your earned income from your prior year's tax return or the annual limit   set by CRA ($30.780 for 2023), plus any unused contribution room from prior years less any pension adjustments.

Question: RRSP contribution limits - Where can I find my RRSP contribution limit for this year?

Answer:     There are 3 ways to find your limit;

1.    Log-in on your CRA account and view your Notice of Assessment from your tax filing

2.    Review the Notice of Assessment from CRA mailed to you after filing your taxes

3.    Call CRA at 1-800-959-8281

Question: RRSP withdrawals before maturity - What are the implications of withdrawing funds from my RRSP early?

Answer:     Sometimes financial pressures such as job loss or cash flow shortfalls may make it necessary to weigh the option of withdrawing funds from your RRSP before you actually retire. There are factors to consider;

1.   You will pay a withholding tax based on the amount withdrawn and your province of residence. The example shown below is based on living in Ontario. Less than $5,000 is subject to 10% withholding tax, $5,001 to $15,000 would face a 20% withholding tax and anything more than $15,000 is 30%.

2.  You must report your withdrawal as income on your tax return for the year it was withdrawn. The increase in  income may  push you into a higher tax bracket which would mean additional tax costs for you.

3.   You permanently lose that contribution room you originally used to contribute.

4.    You lose out on tax-free compounding of your investment.

HOME BUYERS' PLAN (HBP)

•   As a first time home buyer, the Home Buyers' Plan allows you to withdraw up to $35,000 from your RRSP  without paying withholding tax or counting the proceeds as income. You start to re-pay the funds to your RRSP two years after the withdrawal and have 15 years to pay the full amount back into your RRSP.  Qualifying is subject to meeting the eligibility requirements of the CRA. The CRA will provide an annual update with the minimum payment required. Visit the link below for more information.

LIFELONG LEARNING PLAN (LLP)

•   The LLP is a government program that allows you to withdraw up to $10,000 in a calendar year and $20,000 in total to finance full-time education for you or your spouse. Children are not eligible for this program. You have 10 years to pay back to your RRSP starting 5 years after withdrawal if all student criteria is met. Visit the link below for more information.

Through our affiliation with Sterling Mutuals Inc we have access to numerous mutual fund and ETF providers. This increased selection allows for a more tailored approach to help you meet your retirement goals based on your time horizon and risk tolerance. The needs of the client always come first.