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Deadline for RRSP contribution approaching fast (Toronto)

Plan for RRSP contribution if you are in Canada

RRSP (Registered Retirement Savings Account) is a special type of retirement saving account for people living in Canada (including US citizens employed in Canada). RRSP contribution deadline for Protected content year is 29th February, 11:59 PM, Protected content . There is no restriction on the number of RRSP account one can open, however, the total contribution limit is restricted lesser of $24,930 or 18% of your earned income in previous year minus any pension adjustments.

When one puts money in RRSP it reduces their income tax payable and earning inside RRSP is tax sheltered.

Let’s see how it works, one with $55,000 taxable income in Ontario in Protected content year decides not put any money in RRSP, so the total tax he or she has to pay would be $10,129 with federal $7, Protected content provincial $2,857.

If the same person decides to put $10,000 in RRSP, this will reduce the taxable income by that much to $45,000 and total tax payable would be $7,014 with federal $5,072 and provincial $1,942. So, that is a tax savings of $3,115.

Let’s say, one has a balance of $50,000 in RRSP which he/she invested in stocks, bonds, mutual funds, real estate etc. The benefit of registered account is the income that generated from these investments are tax sheltered which means the investor do have to pay any tax for that, until he or she decides to take money out of RRSP in which case they have to pay tax.

Since this is saving for retirement most people would not take money out of RRSP and when they eventually retire they would be in lower tax bracket and as a result they would pay much lower tax for withdrawals.

Unused RRSP contribution room can be carried forward indefinitely; however, there is penalty for over contribution.

There is no minimum age for RRSP contribution; however, one has to be over 18 years to contribution more than $2000.

One can contribute his employment or business income to his unused contribution room until December 31st of the year he or she turns 71. After 71 years all RRSP has to be transformed into a RIF and investors has to start taking money out from that (there is a minimum amount, however, no max limit).

So, start planning for your RRSP contribution right now and save tax and grow money tax sheltered for your retirement. If you have any related question or want to know more feel free to send an email at Protected content . I will be happy to answer.


Tanveer Mustafiz
Financial Consultant
Investors Group
Toronto, Canada

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