RRSP is a huge topic to discuss. In this section, we just highlighted some key frequently asked questions. It is advised that contact a professional for your tailored RRSP solution.

Question
What is an RRSP?

Answer
RRSP stands for Registered Retirement Savings Plan. Suppose, in 2022, your total income is $80,000 and you contributed $10,000 to RRSP. This means, you will be taxed on $70,000. You are getting a tax advantage on your RRSP contribution of $10,000.

Question
Are TFSA, RESP and RRSP the same?

Answer
Tax Free Savings Account (TFSA) is a registered savings mechanism introduced by the government of Canada. Minimum age for investing in TFSA is 18, maximum age limit is lifetime. You can only invest up to the limit determined by the federal government (currently, it is $6,000 per year). Suppose, you earned $80,000 in 2022. Out of this, you saved $5,000 and invested in TFSA. Unlike in RRSP, you will be taxed on $80,000. However, any income from the TFSA will be tax free. That means, you do not need to report the income from your TFSA account. You can easily withdraw from the TFSA and this will not be included in your taxable income.

There is no tax benefit for RESP (Registered Education Savings Plans). However, a government grant is available on RESP savings. This is just a savings tool.

Question
Is there any age limit to contribute to RRSP?

Answer
There is no minimum age limit. As long as a Canadian has employment income and files the tax return, s/he will be eligible for contributing to RRSP in the next year.

However, there is a maximum age limit. You can contribute to your RRSP up to December 31 of the year you turn 71.

Question
In the past several years I contributed to my RRSP. Can I withdraw the amount in case I need it?

Answer
You can withdraw from the RRSP in following situations:

a) When RRSP matures
b) When you are planning to buy your principal residence (RRSP Home Buyers’ Plan)
c) When you are pursuing education (Lifelong Learning Plan)

If you withdraw in any other time other than the above cases, the withdrawn amount will be included in your taxable income and will be taxed at your marginal tax rate.

Question
What should I do if I invest in RRSP but not claimed in my income tax return?

Answer
a) You can leave the unused contribution in the plan and claim it in a future year to reduce your tax liability, or
b) you can withdraw the unused contribution.

Questions
a) How will I find my RRSP contribution limit?
b) I haven’t contributed to my RRSP ever. Can I contribute all my available room in a single year? For example, the 2021 room is $35,000 and the 2022 room is $21,000; in 2022, can I contribute $56,000 to my RRSP?

Answers
a) If you look at page three of your Notice of Assessment (NOA), which is provided by Canada Revenue Agency (CRA), you will see a table which shows the calculation of your RRSP room. At the bottom of the table you will see the RRSP contribution room for the next year.

(b) You can contribute up to your accumulated RRSP room or $29,210 in 2022, whichever is lower.

 

Question
I turned 72. Can I deduct my unused RRSP contribution?

Answer
Unused RRSP contribution means you bought RRSP but not claimed it before. Suppose you have a $20,000 contribution limit still unused. You can deduct this unused RRSP amount either (a) the full amount in the current year, (b) in multiple future years, or (c) in prior year’s tax return as an adjustment.

Question
Can I transfer my deduction limit to someone else?

Answer
No.