Registered Retirement
Savings Plan

Investment & Savings

Registered Retirement Savings Plan (RRSP)

An RRSP allows you to save for retirement. The contributions into this plan are tax-deductible. The investment income within the plan is tax-deferred until you make withdrawals, the income is taxed.

Key Features of an RRSP:

Tax Deductible Contributions: Contributions made to an RRSP are tax-deductible, which means that they can be deducted from your annual income when calculating your taxes. This provides an immediate tax benefit, as it reduces the amount of income on which you are taxed.

Tax-Sheltered Growth: Once the money is inside an RRSP, it can grow on a tax-sheltered basis. This means that any income, such as interest, dividends, or capital gains, generated within the RRSP is not subject to taxes as long as the funds remain in the account.

Contribution Limit: There is no limit to the number of RRSPs an individual may own. There is a restriction on the amount that may be contributed to RRSPs on a per-year basis. The maximum annual tax-deductible contributions to RRSPs an individual can make is the lesser of:

  • 18% of the previous year’s earned income; or
  • The RRSP dollar limit for the year set by the CRA

The government sets a limit on how much you can contribute to your RRSP each year. The contribution limit is based on a percentage of your income, up to a specified maximum. It’s important to note that unused contributions can be carried forward to future years.

Withdrawals and Tax Implications: Withdrawals from an RRSP are considered taxable income, and they are subject to withholding taxes. The amount of tax withheld depends on the amount withdrawn. However, the withheld amount is an estimate and may not cover your full tax liability. When you make a withdrawal, the amount is added to your taxable income for that year.

Deadline for Contributions: The deadline to contribute to an RRSP and have it count for a specific tax year is typically March 1st of the following calendar year. For example, contributions made by March 1, 2024 can be claimed on your 2023 tax return.

Conversion to Registered Retirement Income Fund (RRIF): By the end of the year in which you turn 71, you must convert your RRSP into a Registered Retirement Income Fund (RRIF) or use the funds to purchase an annuity. A RRIF provides regular income payments in retirement, and the amount you withdraw from a RRIF is subject to minimum annual withdrawal requirements and taxation.

It’s important to consult with a Financial Advisor or tax professional to understand the specific rules and implications of RRSPs, as they can be complex and vary based on individual circumstances.

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For for 26 years Pinkney Financial Services has been a very important part of my financial future. I’m most grateful for everything they have done for me over these many years.
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