Invest in tomorrow, while saving on your taxes today
Registered Retirement Savings Plans (RRSP)
Making an RRSP contribution is a great way to plan for your future. By contributing to an RRSP, you can reduce your taxable income, pay less tax now, and potentially build a larger retirement fund for the future.
At TD Asset Management, we want to provide you with some information related to making RRSP contributions, to help you make the most out of your money this tax season.
Frequently Asked Questions
- An RRSP (Registered Retirement Savings Plan) is a tax-advantaged savings plan, that can help you grow your retirement income. Any investment income earned in an RRSP is tax-deferred, until withdrawn.
- With an RRSP, your contributions are tax-deductible, meaning that you can deduct the amount you contribute from taxable income when filing your taxes. This means potentially paying less tax and saving more money.
- Any growth of your investments inside an RRSP is not taxed until withdrawn, potentially allowing your savings to grow faster.
- RRSPs are versatile savings vehicles – while RRSPs are primarily used to save for retirement. You can also use your RRSP to help with the down payment on your first home through the Home Buyers' Plan or to fund your education through the Lifelong Learning Plan1.
- Interested in growing a retirement nest with your spouse or common-law partner? With a Spousal RRSP, couples can more evenly split their retirement income.
1 Subject to eligibility and conditions.
- Cash.
- Savings account.
- GICs (Guaranteed Investment Certificates): An investment that offers a guaranteed rate of return over a fixed period.
- Mutual Funds: An investment fund that pools the money of individual investors and uses it to buy securities such as stocks, bonds or other mutual funds. Unlike most other types of investment funds, mutual funds are “open-ended,” which means as more people invest, the fund issues new units.
- Government and Corporate Savings Bonds: Investments that work like an IOU (I-Owe-You), wherein investors make loans to a company/government, and usually earn a fixed rate of return.
- Securities listed on a designated stock exchange – including individual stocks.
- Exchange-Traded Funds (ETFs): An investment fund that holds the same mix of investments as a stock or bond market index and trades on a stock exchange.
- March 1, 2021 is the last day to make RRSP contributions for the 2020 tax year.
- You have 60 days after the end of the year to make your RRSP contribution for the previous year.
- Your RRSP deduction limit is calculated as follows: the lesser of 1) 18% of the earned income you reported on your tax return in the previous year and 2) the maximum annual RRSP contribution limit. The maximum RRSP contribution limit for 2020 is $27,230. Any contribution room not deducted in previous years can be carried forward, while pension adjustments reduce contribution room. The Canada Revenue Agency (CRA) generally calculates your contribution room for the following year on your Notice of Assessment; it is also available on the CRA's website, if you are registered for MyAccount.
- RRSP contribution limits for previous years were:
- 2019: $26,500
- 2018: $26,230
- 2017: $26,010
- 2016: $25,370
- 2015: $24,930
- 2014: $24,270
- 2013: $24,820
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