Last-Minute RRSP Planning: Deadline, Limits and More
By The Inspired Investor TeamFebruary 1, 2023
The deadline to contribute to a Registered Retirement Savings Plan (RRSP) for the current tax year is March 1, 2023 – in other words, just around the corner! Here's some helpful info to have on hand.
Whether you’ve already got an RRSP, or you’re looking to set one up, here’s some helpful information to help you stay organized.
You have 60 days after the end of the year to make your RRSP contribution for the previous year. For the 2022 tax year, the deadline is March 1.
The Government of Canada sets the annual contribution limit. You can check your specific contribution limit by visiting My Account for Individuals on the Canada Revenue Agency (CRA) website.
Your maximum allowable RRSP contribution for the current tax year is generally 18 per cent of your previous year’s earned income, up to the government maximum for the tax year ($29,210 for 2022), minus your previous year’s pension adjustment. A pension adjustment reflects the value of the benefits and savings under an employer’s registered pension plans and deferred profit-sharing plans. Any unused deduction room at the end of the preceding year is also carried forward for your use in the year.
The reason it’s good to know your contribution limit is because there can be penalties if you go over it by more than $2,000. The penalty is based on the amount of the ‘over contribution’ and is 1 per cent per month on the excess amount.
Opening an RRSP
With a valid Social Insurance Number, you can open an RRSP up to the end of the year you turn 71. You must be a Canadian resident for tax purposes, file an income tax return in Canada and have earned income to contribute to an RRSP. In some cases, you must be the age of majority in your home province to open an RRSP.
A spousal RRSP is a registered retirement savings plan that names your spouse as the “annuitant” — or owner — of the plan, even though you might be making the contributions. The main objective of a spousal RRSP is to shift retirement income from the higher-income-earning spouse to the lower-income-earning spouse. Your ability to contribute to a spousal RRSP is based on your own contribution room. If, for example, you have $15,000 of RRSP contribution room available, you may contribute it to your personal RRSP, a Spousal RRSP, or a combination of both, as long as the combined total doesn’t put you over the $15,000 limit.
Your RRSP can be built using different types of qualified investments, such as stocks, bonds, options, mutual funds, exchange-traded funds (ETFs), savings deposits, treasury bills and guaranteed investment certificates (GICs).
Financial planning services and investment advice are provided by Royal Mutual Funds Inc. (RMFI). RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.