RRSP: Save for a Comfortable Retirement

×

RRSP Contribution Limits & Key Rules

Understanding Your 2024 RRSP Contribution Capacity:

For the 2024 tax year, your RRSP contribution room is determined by the lesser of these two amounts:

• 18% of your earned income from the preceding year (2023).
• The annual dollar cap, which is $31,560 for 2024.

Additionally, any contribution space you didn't use in prior years gets added to this limit. Your definitive personal RRSP contribution limit can be found on your 2023 Notice of Assessment from the CRA.

Important Age Note: RRSP contributions must cease by December 31st of the year you reach age 71.

Key Deadline for 2024 Tax Year RRSP Contributions:

The final day to make RRSP contributions that can be claimed on your 2024 tax return is Monday, March 3, 2025.

• Benefit of Timely Contributions: Making your RRSP deposits by this date allows you to potentially reduce your 2024 taxable income, which could lead to tax savings when you file your 2024 taxes.
• Consequences of Missing the Deadline: While contributions can be made after this date, they cannot be applied to your 2024 tax return. Instead, you would claim such deductions on your 2025 tax return.

Determining Your Personal RRSP Contribution Allowance:

Your individual RRSP contribution capacity is established by an annual deduction limit. This limit is calculated as 18% of your earned income from the previous year, but it cannot exceed a maximum dollar amount set annually by tax regulations. If you haven't maximized your contributions in past years, that unused room carries forward and increases your current limit.

Annual RRSP Dollar Limits (Examples):

Contribution Year (Based on Prior Year's Income)	RRSP Dollar Limit
2024 (for 2023 income)	$31,560
2023 (for 2022 income)	$30,780
2025 (projected, for 2024 income)	$32,490

Note: These are annual maximums; your personal limit is 18% of your prior year's earned income, up to these amounts, plus carry-forward room, minus pension adjustments.

Factors Influencing Your Available RRSP Room:

• Unused contribution space from prior years.
• Adjustments for contributions to a registered pension plan (RPP) or deferred profit-sharing plan (DPSP), known as your Pension Adjustment (PA).
• Any past overcontributions.
• Your earned income from the previous tax year.

To find your precise RRSP deduction limit, consult your latest Notice of Assessment (NOA) from the Canada Revenue Agency (CRA), or log in to your CRA My Account online.

Managing RRSP Overcontributions:

Exceeding your RRSP deduction limit results in an overcontribution. Here's how it's handled:

• Permitted Overcontribution ($2,000 Buffer for Adults): If you are 18 or older, you can overcontribute by up to $2,000 without immediate tax penalties. However, this excess amount cannot be deducted for tax purposes until sufficient contribution room becomes available in a future year.
• Overcontributions Beyond $2,000 (or any amount if under 18): A penalty tax of 1% per month applies to the overcontribution amount that exceeds the $2,000 buffer (or the entire overcontribution if you are under 18 during the year of overcontribution). This penalty continues until the excess funds are withdrawn or new contribution room covers the excess.

Note: If you don’t correct your overcontribution before the end of the year it will reduce the amount you can contribute the following year. This reduction does not cancel out any penalty taxes already incurred.

RRSP Contribution Age Considerations:

• Minimum Age: While there's no federally mandated minimum age to contribute to an RRSP (provided you have earned income and contribution room), practical considerations apply. For instance, the $2,000 overcontribution buffer without penalty is only available to those 18 or older. Financial institutions may also have age restrictions for opening accounts or holding certain investments, and provincial age of majority rules can affect accessing programs like the Home Buyers' Plan.
• Maximum Age for Personal RRSP Contributions: You must stop contributing to your own RRSP by December 31st of the year in which you turn 71. Your RRSP must also be converted (e.g., to a RRIF or annuity) or cashed out by this deadline.

The information provided here is for general guidance only and is based on current tax rules, which are subject to change. For precise details regarding your personal RRSP contribution limits, eligibility, and tax implications, please consult your official Canada Revenue Agency (CRA) Notice of Assessment, visit the CRA website, or speak with a qualified financial advisor from OneProtection.ca.

×

Understanding Spousal RRSPs

A Spousal RRSP is a strategic way for couples to manage their retirement savings and potentially reduce their overall tax burden in retirement.

What is a Spousal RRSP?

A Spousal RRSP allows a higher-income spouse or common-law partner to contribute to an RRSP registered in their lower-income spouse's or partner's name. The contributing spouse receives the tax deduction for the contributions made, but the account itself is owned by the annuitant spouse (the one in whose name the RRSP is registered).

Key Benefits of a Spousal RRSP:

• Income Splitting in Retirement: The primary goal is to equalize retirement income between spouses. When funds are withdrawn from the Spousal RRSP in retirement (typically when the annuitant spouse is in a lower tax bracket), the income is taxed in their hands, potentially leading to lower overall family taxes.
• Tax Deduction for Contributor: The spouse making the contribution gets the immediate tax deduction, which can be particularly beneficial if they are in a higher tax bracket than the annuitant spouse.
• Building Retirement Savings for Both Spouses: It helps ensure both partners have retirement savings, even if one has had lower income or career interruptions.

Important Rules and Considerations:

• Contribution Limits: Contributions to a Spousal RRSP count against the *contributing* spouse's personal RRSP deduction limit. You cannot contribute more than your own available room.
• Attribution Rules (3-Year Rule): If funds are withdrawn from a Spousal RRSP, the income may be attributed back to the contributing spouse (and taxed in their hands) if contributions were made in the year of withdrawal or in the two preceding calendar years. After this period, withdrawals are generally taxed in the hands of the annuitant spouse.
• Ownership: The annuitant spouse owns the Spousal RRSP and makes all investment decisions for the account.
• Age Limit for Contributions: The contributing spouse can make contributions to a Spousal RRSP until December 31st of the year the *annuitant spouse* turns 71, provided the contributor still has RRSP deduction room available. This means if the annuitant spouse is younger, contributions can continue even if the contributor is over 71.

Spousal RRSPs can be a valuable part of a comprehensive retirement strategy. We can help you determine if a Spousal RRSP is right for your family's financial situation.

This information is for general guidance. For personalized advice regarding Spousal RRSPs, please consult with a qualified financial advisor.