Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan (RRSP) is an investing savings plan for you, your spouse or common-law partner that you can contribute to and is registered with the Government of Canada.  For Canadians wishing to grow pre-tax money the RRSP is a safe haven that allows you to compound your savings and avoid paying taxes until retirement at which time the funds are taxed at the marginal rate.  Deductible RRSP contributions can also be used to reduce your annual tax payment making RRSPs an ideal tool in saving you money and planning for the future.  It should be noted that any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan.

You can set up a registered retirement savings plan through a financial institution such as a bank, credit union, trust or insurance company  Your financial institution will advise you on the types of RRSP and the investments they can contain.

You may want to set up a spousal or common-law partner RRSP.  This type of plan can help ensure that retirement income is evenly split between both of you.  The benefit is greatest if a higher-income spouse or common-law partner contributes to an RRSP for a lower-income spouse or common-law partner.

In addition, you may want to set up a self-directed RRSP if you prefer to build and manage your own investment portfolio by buying and selling a variety of different types of investments.  This approach is perfect for the savvy investor or an individual with time, patience and stomach to devote him / herself to changing market conditions.

We can help you determine your RRSP Deduction Limit however for anyone eager to get a jump on contributing the Government of Canada offers the following on where to find your registered retirement savings plan (RRSP), pooled registered savings plan (PRPP) deduction limit, often called your “contribution room”:

• Form T1028, Your RRSP Information for 2018
  • Canada Revenue Agency may send you a Form T1028 if there are any changes to your RRSP deduction limit since your last assessment.
• My Account
• MyCRA mobile app
• Tax information Phone Service (TIPS)
• the “Available contribution room for 2018” amount found on the RRSP Deduction Limit Statement, on your latest notice of assessment or notice of reassessment (see image below)

The Canada Revenue Agency generally calculates your RRSP deduction limit as follows:

The lesser of

• 18% of your earned income in the previous year, and
• the annual RRSP limit

Minus

• your pension adjustments (PA)
• your past service pension adjustments (PSPA)

Plus

• your pension adjustment reversals (PAR), and
• your unused RRSP, PRPP, or SPP contributions at the end of the previous year

The 2019 annual RRSP limit of $26,500

If you want to calculate your RRSP deduction limit yourself, see chart 3 of Guide T4040, RRSPs and Other Registered Plans for Retirement.