A registered retirement savings plan (RRSP) is a savings program that is overseen by the federal government. Initial RRSP contributions entitle investors to a tax deduction. Furthermore, amounts accumulated in an RRSP can continue to grow in a tax-sheltered savings vehicle and is usually used to finance one’s retirement. The amount investors may contribute to their RRSP depends on how much income they earned in the previous year. Finally, taxes are payable on RRSPs during the year in which they are used.

What is the maximum age to contribute to RRSPs?

Individuals can contribute to their RRSP until December 31 of the year in which they turn 71. However, if the contributor is over 71 and declares an earned income, he may contribute to his spouse’s RRSP if his spouse is 71 years of age or under.

What are the tax benefits of having RRSPs?

  • Reducing taxable income in higher-earning years
  • Increasing income in retirement, while decreasing taxable income at the time of contribution
  • Using spousal plans as a form on income splitting
  • Earnings inside the RRSP not being taxed as long as the funds are not withdrawn

How is earned income calculated?

  • Includes income from employment, business and rental property
  • Excludes interest, dividend income and capital gains
  • Reduced by losses or other deductible amounts; examples would be losses from a business or rental property and alimony paid.

What are the current contribution limits?

The annual contribution room corresponds to the lowest of the following amounts:

  • 18% of the income earned the previous year
  • The following RRSP contribution ceilings


Year Maximum Annual contribution
2009 $21,000
2010 $22,000
2011 $22,450
2012 $22,970
2013 $23,820
2014 $24,270
2015 $24,930
2016 $25,370

Note that the RRSP contribution ceiling is decreased by the previous year’s pension adjustment or the previous year’s past service pension adjustment. In some circumstances, a pension adjustment reversal (PAR) can increase this maximum.

Can retirement allowance be transferred to RRSP?

A retirement allowance from the employer can be transferred tax-free to an RRSP, but cannot beused as a tax deduction, according to the eligible amount. Note that the transfer of a retirementallowance to an RRSP does not reduce the annual contribution room, and the retirement allowance cannot be transferred to the spouse’s RRSP.

What does it mean to carry forward unused RRSP contributions room?

The difference between the contributions made and the maximum allowed for the year since 1991 may be deferred and can be carried forward for subsequent years. The amount of unused contributions isindicated on the notice of assessment sent by the Canada Customs and Revenue Agency after income tax is filed.

What are the rules regarding excess contributions?

As of January 1, 1996, individuals can accumulate up to $2,000 over and above the maximum amount allowed in their RRSP without incurring any penalties. This excess amount does not entitle them to an immediate deduction, but can be used as a deduction in subsequent years.

What is spousal RRSP?

Individuals can contribute to their spouse’s RRSP and apply the tax deduction as the contributor. The total contributions made during the year (to their own RRSP and to their spouse’s) must not exceed the maximum amount allowed for the contributor. If an amount is withdrawn from the spouse’s RRSP since the last contribution made to one of the spouse’s RRSP contracts (regardless of the institution) before three consecutive dates of December 31 have elapsed, the tax on the withdrawal is charged to the contributor (not to the spouse).

What type of Investments can be held in RRSP?

  • Guaranteed investment certificates (GIC) and term deposits
  • Money and deposits of money, in any currency held in Canadian bank, trust company and credit union
  • Treasury bills
  • Bonds, debentures, notes, mortgages, or similar obligations, guaranteed by the Government of Canada or of a province, municipality or crown corporation, for example Canada Saving Bonds
  • Debt obligations issued by corporations, where the shares are listed on a prescribed stock exchange in Canada
  • Debt obligations issued by government of a country other than Canada
  • Mutual funds and segregated funds
  • Shares or units in credit union
  • Shares listed on a prescribed stock exchange inside and outside Canada
  • Limited partnership units listed on a Canadian stock exchange
  • Shares of small business corporations
  • Gold and silver bullion, coins and certificates
  • Debt obligations that have an investment grade rating and are part of minimum $25,000,000 issuance
  • Securities (other than future contract) listed on a designates stock exchange

What are the options available upon maturity of an RRSP contract?

The RRSP matures in the year in which the annuitant reaches the age of 71 years. Before the end of the calendar year in which the annuitant turns 71, the amounts held in an RRSP contract must be allocated for another purpose. At this time, the annuitant has three options:

  • Cash in the RRSP amounts
  • Convert the balance of the RRSP contract to a RRIF
  • Purchase an annuity.

It is also possible, and often quite useful, to combine these options.

What is the purpose of the Home Buyers’ Plan?

The Home Buyers’ Plan allows eligible individuals to withdraw up to $25,000 tax free from their Registered Retirement Savings Plan (RRSP) to purchase or build a qualifying home.

-Eligibility criteria for Home Buyers’ Plan

The Canada Revenue Agency considers the following persons first-time home buyers:

  • persons, including former homeowners, who have not owned a home they occupied as a principal place of residence at any time during the four-year period before the date of withdrawal of funds
  • disabled persons acquiring a more accessible home
  • persons acquiring a more accessible home for a disabled person related to them by blood, marriage, common-law partnership or adoption
  • persons providing funds to a disabled person related to them by blood, marriage, common-law partnership or adoption, to build or purchase a more accessible home
  • other criteria may apply

What is the purpose of Lifelong Learning Plan?

The Lifelong Learning Plan allows you to pay for training or education with RRSP funds. Here are some of the key facts:

  • You can withdraw up to $10,000 per calendar year to finance full–time training or post–secondary education.
  • The student can be you or your spouse, but not your children.
  • If the student meets disability requirements, then the training/education can be on a part-time basis.
  • The total amount that can be withdrawn is $20,000 with withdrawals over a maximum of four consecutive years.
  • Amounts that are withdrawn are not subject to taxes on withdrawal.
  • At least 10% of the amount borrowed must be repaid each year, over a maximum period of 10 years.