RRSP Contribution Deadline – March 1, 2022

You have until March 1, 2022, to contribute to your RRSP for the 2021 tax year. Check your CRA Notice of Assessment to find your contribution limit and save for your retirement while taking advantage of the many tax benefits.

If you are considering opening an RRSP and want to learn more about it, here is a quick primer to get you started.

What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is an account created by the federal government to help Canadians save for retirement. It is an account that provides a way to invest for retirement with certain tax-saving features. Think of it as an additional pension plan to supplement your existing government pension.

How does an RRSP work?

The most important feature of an RRSP is the way it is taxed. There are three tax advantages to opening an RRSP – your contributions will be:

Tax-deductible  

Your RRSP contributions are made with post-tax dollars and your contribution amount will be deducted from your income on your tax return. For example, if you earned $60,000 last year and contributed $7,000 to your RRSP - you would pay taxes as if you earned $53,000.

The benefit – you will pay less income tax or you may even receive a tax refund.

Tax-sheltered

The investments in your RRSP grow tax-free and you won’t pay tax on your investment earnings while they stay in your plan.

The benefit – you get the benefit of tax-free compounding of returns.

Tax-deferred

You do not pay tax on the contributions going into your RRSP - but you will pay tax on the savings you withdraw from your RRSP, including both contributions and investment earnings.  You must start withdrawing from your RRSP the year after you turn 71 years of age.

The benefit – you will pay less tax in your higher income years where you may be in a higher tax bracket and less tax in your retirement years where you may be in a lower tax bracket.

How much can I contribute?

RRSPs are registered accounts and are subject to contribution rules.  For the 2021 tax year, you can contribute 18% of your previous year’s income or up to $27,830 - whichever is less. If you did not max out your RRSP contributions from previous years' tax filings that unused amount carries over.

The easiest way to check how much contribution room you have is to look at the Notice of Assessment you receive from the Canada Revenue Agency (CRA) after filing your taxes.

When is the contribution deadline?

The RRSP deadline for the 2021 tax year is March 1, 2022.

What types of accounts and investments are allowed in RRSPs?

You can hold many types of investments in an RRSP. They include:

• Cash
• Mutual Funds
• GICs (Guaranteed Investment Certificates)
• Stocks
• ETFs (Exchange-Traded Funds)
• Bonds

Can I over contribute to an RRSP?

Canada Revenue Agency will tax your over-contribution amount at the rate of 1% per month until the amount is withdrawn from your RRSP. The CRA does allow a $2,000 grace amount for over-contribution - but that amount is not tax-deductible and you will be charged tax on the amount.

Talk to a financial advisor

Nothing beats personalized advice. To get the most of your RRSP contributions and take advantage of the investment earnings potential talk to a financial advisor. UCU Wealth Strategies Group can help you make smart investment choices. They will look at your financial situation and help you create an investment strategy that is right for you and your retirement.

For more information please visit your local Branch or the UCU website.