A Guide to Registered Retirement Savings Plans (RRSPs)
- Sharp & Associates
- Feb 7, 2021
- 2 min read
Its never to early to plan for the future, and for retirement. One of the easier ways to do so, is through a registered retirement savings plan (RRSP), which not only sets aside funds, but also helps them to grow in a tax-deferred manner.
Whether you already have an RRSP, or are considering opening one, SHARP & Associates is here to help answer any questions you may have regarding RRSPs:
What is a RRSP?
An RRSP is a savings account which allows savings for retirement to grow tax-free in a plan registered with the Canadian government. An RRSP can hold several types of investments (e.g., stocks, bonds and mutual funds) which you can work with your plan provider to determine.
How is income generated by the RRSP taxed?
Any income generated by the RRSP is tax deferred. This means that as long as the income remains in the RRSP, it is not taxed. However, you will have to pay taxes once the funds are withdrawn (generally, after you’ve retired)
What are the current tax benefits associated with an RRSP?
RRSP contributions are tax deductible, as long as these are within the contribution limit. Eligible contributions reduce your taxable income, and thereby reduce the amount of taxes you have to pay.
How much can be contributed to an RRSP?
The contribution limit is set to 18% of earned income to a maximum of $27,230 for 2020, and $27,830 for 2021.
What if the maximum contribution is not made?
If you don’t make the maximum contribution, you can carry unused contribution room forward indefinitely. This will add to the amount you can contribute in future years
Where can an individual’s contribution limit be found?
A taxpayer’s contribution limit and carry-forward information can be found on their notice of assessment.
What is the deadline for contributions to be deducted on a 2020 tax return?
The deadline for contributions to be eligible for deduction on a 2020 tax return is March 1, 2021. Any contributions made from March 3, 2020 to March 1 2021 are eligible for deduction.
While the deadline is fast approaching, don’t wait until it does to start contributing if you haven’t already. The faster you begin to contribute, the sooner your money can grow, and the more you’ll have in the future.
Of course, if you have any questions about your RRSP contributions, or any other tax-related matters, our team of experts is here to help..
Click the “Get in Touch” button to get started.
Click below to visit the CRA & Sun Life Investments website for further details:
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