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Benefits of contributing to an RRSP

There are many benefits to having an RRSP as part of your investment and retirement savings strategy:

Pay less income tax now

Your annual contribution can be deducted from your gross income, reducing the amount of income tax you pay that year.

Defer tax on your investment income

The income you earn is sheltered from tax, allowing it to grow faster. By the time you retire and withdraw funds, you will likely be in a lower tax bracket.

You can borrow your own money

You can withdraw money from your RRSP to buy your first home or pay for your or your spouse’s education, without penalty, providing it’s repaid within the specified time.

RRSP vs. TFSA: what’s the difference?

 
TFSA
RRSP
Flexible?
  • Can be withdrawn anytime and used for anything
  • Cannot withdraw funds penalty-free except for under Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP)
Product options:
Direct Contributions?
  • Can contribute directly (up to $81,500 total as of 2022)
  • Can contribute directly (18% of previous year's earned income up to $29,210 for 2022)
Tax Deduction?
  • No tax deduction for contributions
  • You can claim a tax deduction in the year you make a contribution, or carry it forward to future years
Withdrawal Rules:
  • Withdraw any amount at any time, without paying income tax
  • When you cash out, it's tax-free
  • Can only replace the amount of the withdrawal in the same year if you have available TFSA contribution room
  • When you cash out, you have to pay income tax
Contribution Limits:
  • Annual maximum: Varies year to year. Max of $6,000 for 2022.
  • Lifetime maximum: As of 2022, $81,500 total for those who were 18 in 2009.
  • Annual maximum: 18% of previous year's earned income up to $29,210 (whichever is lower).
Expiration?
  • No expiry
  • RRSP must be converted to a Registered Retirement Income Fund (RRIF) by Dec 31 of the year you turn 71.

Maximize your retirement savings

The primary reason to contribute to an RRSP is to have another source of retirement income. When you contribute to your RRSP in your working years, you receive an immediate tax benefit as the contributions are tax deductible. Your retirement savings then grows tax-sheltered within the plan so your money grows faster. Then when you retire, you’ll have an income to draw on to supplement your other sources of income.


Who is eligible for an RRSP?

Any individual who is a Canadian resident, has earned income, and files an income tax return in Canada can contribute to an RRSP until December 31 of the year they turn 71 years old.


How much can I contribute to an RRSP?

There are contribution limits on RRSPs. The exact amount you can contribute for the current year can be found on your most recent Notice of Assessment you received from the CRA. As a guideline, your allowable RRSP contribution for the current year is the lower of:

  • 18% of your earned income from the previous year
  • The maximum annual contribution limit for the tax year
  • The remaining limit after any company sponsored pension plan contributions

Maximum annual RRSP contribution limits for the last seven years:

Year
Contribution limit
2013 $23,820
2014 $24,270
2015 $24,930
2016 $25,370
2017 $26,010
2018 $26,230
2019 $26,500
2020 $27,230
2021 $27,830
2022 $29,210

Retirement Planner

Our Retirement Planner Calculator determines the amount of savings that you'll need to retire comfortably. By flagging any shortfalls or surpluses, the Calculator outlines the savings required to reach your financial goals for retirement.

These calculators are made available to you as tools for independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy. All examples are hypothetical and are for illustrative purposes only.

What to put in your RRSP
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What to put in your RRSP

Talk to one of our representatives to learn how a WealthONE RRSP can hold a variety of investments, including:

  • Guaranteed Investment Certificate (GIC)

  • High Interest Savings deposits


Investing

The Advantages of Tax Free Savings Accounts (TFSAs)

A TFSA is a registered savings account you can use to save for a major purchase or a goal. Your earnings and withdrawals are tax-free, so your money grows faster!

The Advantages of Tax Free Savings Accounts (TFSAs)