Registered Retirement Savings Plan (RRSP)

What’s an RRSP?

A RRSP stands for Registered Retirement Savings Plan. An RRSP is a registered account with the federal government to allow Canadians to save for retirement purposes.

RRSP is advantageous for two reasons:

• Contributions to an RRSP can be used to reduce your taxes.
• Within a RRSP account, revenues generated from investments such as capital gains, dividends or interests will not be taxed.

Who is eligible?

Canadian residents

You can contribute to an RRSP up to the end of the year you turn 71.

There is no minimum age required to hold a RRSP account.

What is allowed to be held in a RRSP?

Many other types of investment vehicles can be held within a RRSP account, including:

• Guaranteed investment certificate (GICs)
• Bonds
• Stocks
• Exchange traded funds (ETFs)
• Mutual funds

How much can you contribute?

You can contribute 18% of your previous year’s earned income up to $29,210 (whichever is lower).

When can I contribute to an RRSP?

You can contribute to your RRSP during the tax year or, at the latest, 60 days following the tax year, i.e. until March 1, 2022 for this year.

Can I withdraw money from a RRSP?

Withdrawals from an RRSP are taxable as income.

FAQs

What happens if you overcontribute to your RRSP?

There is a lifetime cushion of $2,000. If you exceed your RRSP deduction limit by more than $2,000, you will be charged a 1% penalty on the excess amount, for each month that the excess amount stays in your account.

Can I invest in US stocks within a RRSP?

Yes. If a person chooses to invest in US dividend stocks, these will be best placed in a RRSP as foreign withholding taxes would not apply on dividends.