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What is a Registered Retirement Savings Plan (RRSP)
A Registered Retirement Savings Plan (RRSP) is an investment account that is used to save some of your current income for future use (typically in retirement). When you contribute to an RRSP you are allowed deduct the contribution from your taxable income (within certain limits). This allows you to delay taxes, and invest with tax sheltered dollars. When it is time to withdraw and spend your money you will usually convert the savings you have in your RRSP into a Registered Retirement Income Fund (RRIF) account and start to draw an income.
- You may, at any time, withdraw any amount from your RRSP but the withdrawal is taxable, tax withholding (source deductions) will apply.
- If you make a withdrawal you may not return the funds in the future i.e. the contribution room is lost forever.
- You can have more than one RRSP, but the combined total of your contributions must not exceed your personal limit.
- Most types of investments such as Stocks, bonds, ETFs, GICs and mutual funds can be held inside an RRSP.
How is My Contribution Limit Calculated?
Everyone has a personal RRSP deduction limit which you can find on the notice of assessment that the government sends to you after your file your taxes. You must have an income to create RRSP room and the calculation is as follows:
The lesser of 18% of the earned income you reported on your tax return in the previous year up to a maximum that is set each year (see the table below).
You can also use any contribution room carried forward from previous years. If you have a retirement beneficent from your employer such as a pension plan your maximum for the year will be reduced by a "pension adjustment" that is reported to you on your notice of assessment.
Maximum RRSP contribution limits for previous years were:
| 2023: $30,780 |
| 2022: $29,210 |
| 2021: $27,830 |
| 2020: $27,230 |
| 2019: $26,500 |
| 2018: $26,230 |
| 2017: $26,010 |
| 2016: $25,370 |
| 2015: $24,930 |
| 2014: $24,270 |
| 2013: $24,820 |
Special RRSP Programs
If you meet certain criteria your RRSP can also be used for fund your education and purchase a home. Please visit the CRA website for eligibility information and tax implications.
LINKS | CONTACT Darryl Craig, MBA Financial Advisor (604) 489-0727 #4 - 4313 Alberta Ave. Powell River, BC V8A 2M3
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