Registered Retirement Savings Plan (RRSP)

Contributing to an RRSP results in less taxes and more savings!

What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is a plan that allows you to save money on a tax-deferred basis until you retire. Contributing every year can be a tax-efficient way to build your retirement savings.

Why an RRSP?

Grow your money  - faster!

An RRSP is tax-sheltered - it grows tax-free.  In other words, you don't pay taxes on the interest you earn - at least not until you're ready to use those funds as income when you retire. So just watch your investment grow - faster!

Mix it up - you have choices!

Once you decide an RRSP is right for you, you can choose to invest your funds in many different types of investments such as savings accounts, GICs, mutual funds*, stocks*, bonds* and more. Flexibility is a key benefit to RRSPs.

Save on taxes - now & later!

An RRSP enables you to pay lower taxes today - you get a tax deduction on the amount you contribute to an RRSP (within limits). Now that's a real win-win!

Plus, you can access your RRSP in certain situations without tax implications:

  • The Home Buyer's Plan allows you to withdraw money out of your RRSP to buy your first home with no penalty tax (as long as you follow the rules).
  • The Spousal Plan allows spouses to contribute to each other's RRSPs to lower their income tax bracket.
  • The Lifelong Learning Plan allows you to withdraw money for education with no tax penalty (rules apply).
Click here for our complete guide to Understanding RRSPs.  And not just any guide! It's a 28 page document with everything you wanted to know about RRSPs - and likely a whole lot more!  Looking for more information? Visit our CUSmarter section for all of the advice and tips you are looking for.

Ready to invest? We would love to help! Contact us by telephone at 306 842 6641 or by email.

Who can invest in an RRSP? Expand/Collapse

Anyone who has earned income in the previous year and filed a Canadian tax return can contribute to an RRSP up until December 31 of the year they turn 71.

How do contributions work? Expand/Collapse

The total amount you can contribute is determined by the Canada Revenue Agency (CRA) each year and is calculated as a percentage of earnings.

Generally, you can contribute up to 18% of the previous year's income up to CRA maximum contribution limits. The absolute maximum amount you can contribute to your RRSP in any single year is:

  • $24,930 for 2015
  • $25,370 for 2016, and
  • $26,010 for 2017

If you do not make your maximum annual contribution in any given year, that amount carries forward so you can make it in a later year.

The maximum contribution amount may change, so check the Notice of Assessment you received from the CRA after filing your taxes. It will show your current RRSP contribution limit plus any unused room and pension adjustments. You can also visit the CRA website.

The deadline to contribute is 60 days from January 1; usually the last day in February - unless it falls on a weekend; then it's the first day in March.

Be careful not to over-contribute. There’s a $2,000 lifetime over-contribution limit. Beyond that, you’ll pay a penalty tax of 1% per month on any over-contributions until you withdraw them from the plan.

What are the tax advantages? Expand/Collapse

RRSPs have various tax advantages compared to investing outside of a registered account. Within an RRSP, you do not have to pay tax on any income or growth that you earn. You only pay tax when you withdraw funds from your RRSP, which is hopefully when you are retired and potentially in a lower tax bracket.

You also get immediate tax savings, because you can deduct the amount of your RRSP contributions from your income on your tax return.

Viewed another way, the actual cost of your contribution is reduced because of lower taxes. The table below shows the impact a $5,000 RRSP contribution would have at different marginal tax rates.

Marginal tax rate* 32% 39% 46%
RRSP contribution $5,000 $5,000 $5,000
Reduced taxes $1,600 $1,950 $2,300
Actual cost of contribution $3,400 $3,050 $2,700

You can make contributions to your RRSP throughout the year. Contributions made in the first two months of the year may be applied against either the earned income of the previous year or the current year. Contributions made between March and December are used to reduce taxable income in the year in which the contribution was made.

Why start now? Expand/Collapse

When you turn 65, you’ll receive modest pension benefits from the government, but for many Canadians, it’s not enough. According to Service Canada, the average combined Canada Pension Plan and Old Age Security benefit was just over $1,100 per person per month as of 2015.

If that doesn’t sound like enough to cover your post-retirement needs, consider opening an RRSP and contributing regularly. Speak to one of our investment specialists to find out how to get started.

Smart Moves for Your RRSP Expand/Collapse

Now that you know why RRSPs are one of the best ways to save for your retirement, let's have a look at how you can make the most of them!

Save automatically

If you act on only one idea here, make it this one. Because the difference between retirement success and failure isn’t how much money you make, or how smart you are, but how well you conquer the all-too-human tendencies to procrastinate and under-save. So ask us to automatically route smaller, regular contributions from your chequing account to your RRSP. You’ll get the advantage of dollar cost averaging, you’ll probably save more, and there’s no more scrambling at RRSP season.<>

Start early

It’s practically ‘the’ universal law of saving — start early. You’ll get time and compounding working for you. And that can make a big difference to how much you need to save. A person making $50,000 who wants a retirement income of $40,000 needs to put aside about 8% of their salary each year if they’re starting to save at age 25, but 22% if they’re starting at age 50. 

Save the max

Contributing your maximum is essential to taking full advantage of your RRSP. If you don’t have the money, consider an RRSP loan or using a line of credit. You'll pay interest, but the compounding growth of your money over the long term may far offset the interest costs. Another smart move — use your tax refund to pay down the amount you borrowed.

Save sooner

Make your contribution as early in the year as possible instead of leaving it until the 60th day of the following year when the RRSP deadline is looming. You’ll benefit from up to 14 extra months of tax-deferred compounded growth.

Catch up

Use up your carried forward contribution room as soon as possible. If you can’t catch up in one lump sum, consider borrowing. Check the Notice of Assessment sent to you by the Canada Revenue Agency to find your unused contribution room.

Save for your spouse

If you’re the family’s higher income earner you can invest some or all of your contributions in your spouse’s RRSP and claim the tax deduction. The big benefit comes at retirement when more equalized nest eggs can reduce your combined tax bite and mean more cash to live on.

Name a beneficiary

If you don’t name a beneficiary your RRSP will be considered part of your estate and be subject to probate, taxes, and other fees. In some cases that can reduce its value by almost 50%. If you name your spouse or a dependent child/grandchild as the beneficiary, your RRSP transfers to them tax-free.

Get advice

Whether you’re new to investing, or a seasoned veteran, it’s always a good idea to get professional advice. So drop into any branch of Weyburn Credit Union and speak to an Investment Specialist who can provide you with an expert’s insight and help you make informed decisions about your RRSP.

*Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Mutual funds are offered through Credential Asset Management Inc.


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