RRSP basics – the ABCs of RRSPs

What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is a special kind of investment account designed to help you save for retirement. You can contribute funds to an RRSP for yourself and for your spouse or common-law partner. Your contributions are tax deductible, so they can also help to reduce your income taxes.

You can use the contributions to purchase investments. Your gains and income aren’t taxed while the funds remain in the account. When you do make a withdrawal, the funds are treated as taxable income.

What types of investments can I hold in an RRSP?

You can hold a wide range of investments in an RRSP including stocks, ETFs, mutual funds, bonds, GICs, and cash.

How much can I contribute to my RRSP?

There are limits to how much you can contribute each year. The maximum allowable contribution for the 2019 taxation year is: $26,500. Your allowable contribution room is the lower of:

  • 18 per cent of the earned income reported on your tax return for the previous year
  • The maximum annual contribution limit for the year, as set by the government
  • The remaining limit after any employer-sponsored pension plan contribution

In addition, you can carry forward any unused RRSP contribution room you’ve had since 1991.

To find out your exact amount of contribution room, check your most recent Notice of Assessment from Canada Revenue Agency, or log in to your CRA My Account.

Is there an annual deadline to contribute to an RRSP?

To be eligible for an RRSP deduction in a specific taxation year, you can make contributions anytime during that year, or up to 60 days into the following year.

How long can I contribute to an RRSP?

You can contribute to your RRSP until December 31 of the year in which you turn 71. After that, you must withdraw the assets, convert them into a Registered Retirement Income Fund (RRIF) or purchase an annuity.

When can I start contributing to an RRSP?

There is no minimum contribution age, but you must have earned income reported to the CRA. The sooner you start contributing to your RRSP the better, so you can take advantage of compounding.

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