REGISTERED RETIREMENT SAVINGS PLAN (RRSP):
- Allows you to save for the future on a tax-deferred basis
- Your contributions are tax deductible
- You can contribute to your RRSP until December 31 of the year in which you reach age 71
- The income earned in your RRSP is not taxed until it is withdrawn, typically at a much lower rate during your retirement years
- Your allowable RRSP contribution is: 18% of previous year’s “earned income” or, up to the annual Canada Revenue Agency maximum ($29,210 – 2022 limit) less “pension adjustment”
- The Canada Revenue Agency will notify you of your current RRSP limit after they process your previous year’s tax return
Home Buyer’s Plan
When preparing or contemplating the purchase of your first home, an excellent option to consider is the Home Buyer’s Plan. This plan allows you to use RRSP funds, up to $25,000 per spouse, towards your down payment or any costs incurred in conjunction with your first home purchase. These RRSP contributions can save you up to $11,500 (income tax at 46%) versus saving up the money outside of an RRSP. The Home Buyer’s Plan requires the contributions predate the withdrawal towards home purchase by at least 90 days.
Lifelong Learning Plan
For your own or a spouse’s education savings, the RRSP Lifelong Learning Plan (LLP) enables you to draw $10,000 per year from your RRSP to put towards your education. Similar to the Home Buyers Plan, this option allows you to benefit from tax savings while funding this major expense.
