RRSPs – Frequently asked questions

RRSPs – Frequently asked questions

Q. Where can I get RRSP advice?

A. You can get RRSP investment advice:

Read these blog posts:

Q. Can I contribute to an RRSP online on AccèsD?

A. Yes, it’s possible to contribute to an RRSP online, without delay.

Q. Is there an age limit for contributing to an RRSP?

A. Yes, there is an age limit. You can contribute to your RRSP until the end of the year in which you turn 71 and to your spouse’s RRSP until the end of the year in which he or she turns 71.

Q. What is the final date I can contribute to an RRSP if I want to take advantage of a tax deduction for my 2010 tax return?

A. You have until March 1, 2011, to contribute to an RRSP for 2010. As a general rule, contributions made during the year are deductible from taxable income during the same or subsequent years, while contributions made within the first 60 days of the year may be deducted from taxable income of the preceding year, the current year or subsequent years.

Q. How can I find out the maximum amount I can contribute to a 2010 RRSP?

A. To find out the maximum amount that you can contribute this year, check the Canada Revenue Agency (CRA) tax assessment notice which you received after filing your tax return last year to find the amount indicated in the “[Current year] RRSP Deduction Limit Statement” section. If you cannot find your notice, contact a CRA tax office or visit the electronic services section of the Canada Revenue Agency.

Q. If I wait until I have more money to make larger RRSP contributions, instead of making small contributions now, will it amount to the same?

A. No, it will not. A smaller annual contribution paid into an RRSP over a longer period of time is generally more advantageous. Contributing at the beginning of the year will amount to more in the long run.

Q. When should I start contributing to an RRSP?

A. You can start an RRSP as soon as possible, that is, the year you start earning contribution room (the year after you started earning an income). Moreover, when you turn 19, you can contribute $2,000 over the limit. Time is money: the earlier you start contributing, the bigger your RRSP will be.

Q. What is earned income?

A. Earned income is composed mostly of employment earnings, business earnings, rental income and taxable support payments, from which are deducted union or professional dues and business or rental losses and deductible support payments.

Q. How do I estimate how much I will need at retirement?

A. It is generally recognized that you will need 70% of your income during your retirement years to maintain your standard of living. Although at age 60 you are entitled to various sources of regular income (for example, Ontario Pension Plan), in most cases, you will need savings (preferable RRSP savings) to maintain your lifestyle.

Q. Can I take advantage of tax savings while contributing to my RRSP savings plan?

A. Yes, if you contribute to a Group RRSP at your place of employment. This method allows you to build up capital for retirement, and earn tax savings with every paycheque while contributing to your RRSP. If your employer does not offer this type of plan, suggest that he or she get in touch with the Caisse populaire.

If you are contributing to a regular instalment RRSP, you can also request that both Revenue Ministries reduce the tax deducted at source on your salary. This will, in effect, reduce the cost of your contribution.

Q. Should I increase the amount of my RRSP contributions?

A. The compounding effect on your interest means the more you save, the more you earn. When it comes to RRSP contributions, the motto of “the more the merrier” is truer than ever. In short, every dollar that you have the capacity to add to your RRSP increases the capital on which the interest is calculated. So if you have extra funds or if your financial situation improves, it is to your advantage to contribute these amounts to your RRSP. Even an additional $5 per week in a regular instalment RRSP or a group RRSP will make a difference at the end of the line.

Q. Although my income is sufficient, I do not have ready cash available to invest in an RRSP. What should I do?

A. There are many reasons why you may not have enough ready cash to contribute to your RRSP. One option is to take out a short-term loan. This way, you can increase your RRSP contribution and profit from the tax break. With the savings, you can pay back part of the loan and reduce the number of payments, as well as the interest charged. Another option is to avoid loans altogether by contributing regularly to an Instalment RRSP and integrate saving into your budget. You can also preauthorize your payments to your RRSP using AccèsD Internet. Don’t worry about remembering—your contributions are automatic!