RRSP Deadline is Monday March 1, 2021

Whether you are getting close to retirement or just starting out, an RRSP is a powerful tool to help you save for your future while benefiting from tax deferral opportunities. The deadline for contributions to your Plan for the 2020 tax year is coming up.

RRSP QUICK FACTS

• The allowable contribution room for 2020 is 18% of your earned income* from 2019 to a maximum of $27,230.
• Your allowable RRSP contribution room factors in your pension adjustment(s), past service pension adjustment(s) and pension adjustment reversals, if applicable. It also includes any unused carry-forward room. Your RRSP deduction limit can be found on your most recent notice of assessment.
• The last day to contribute to your RRSP for the 2020 tax year is March 1, 2021.
• RRSP contributions made during the first 60 days of 2021 can be used towards either your 2020 or 2021 RRSP limit.
• A Canaccord RRSP Catch-up Loan is a great way to tax advantage of unused contribution room.

*Earned income includes salary or wages, alimony received and rental income, but does not include investment income.

MINIMIZE TAXES

• RRSP contributions can minimize income taxes in two ways:
  • Contributions up to your RRSP contribution limit can be treated as a deduction from your annual income.
  • Capital gains and income can compound tax-free inside your RRSP. Taxes are payable only when the funds are withdrawn – typically in retirement, when you may be in a significantly lower tax bracket.
• If you have invested less than the maximum allowable RRSP contribution in the past, the unused contribution carries forward until December 31 of the year you turn 71. This means you can take advantage of past years’ extra contribution room to further mitigate tax.
• Consider a spousal RRSP. Spousal RRSPs allow you and your spouse to effectively split your retirement income to potentially reduce your household’s overall tax burden

AFTER AGE 71

By December 31 of the year you turn 71, you need to wind down your RRSP. You have two options:

• Transferring the RRSP to a retirement income option like a RRIF (Registered Retirement Income Fund) — or,
• De-register all of the assets in the RRSP — the entire value of the assets withdrawn are treated as taxable income in the year withdrawn

A RRIF can be viewed as an extension of your RRSP. Your RRSP is used to save for your retirement, while a RRIF is used to withdraw income during your retirement – and, like an RRSP, a RRIF allows for tax-deferred growth, offers several investment options and is government-regulated.

While withdrawals from an RRSP are optional, you must make mandatory minimum withdrawals from your RRIF each year according to a schedule based on your age. Excess withdrawals are subject to withholding tax.

Although RRIF contributions are not allowed, you can still maximize RRSP contributions in the year you turn 71, including any unused contribution room from previous years. Just be sure to make these contributions in plenty of time to convert them to a retirement income option before year-end. After age 71, you can also contribute to a spousal RRSP if your spouse is 71 or younger on December 31 of the year you make the contribution.