What is the registered retirement savings plan (RRSP) deadline?
There are several important RRSP deadlines to keep top of mind.
- In general, the annual RRSP contribution deadline for the current year is 60 days after December 31, unless it ends up on a weekend or on a holiday. In such a case, the deadline moves to the next business day.
- In most years, the annual contribution deadline will fall on March 1 (at midnight).
- In a leap year, the annual contribution deadline will fall on February 29 (at midnight).
- The annual RRSP contribution deadline for tax year 2023 is February 29, 2024.
- If you have an RRSP, you can make contributions up to December 31 of the year you turn age 71 — which is when your RRSP matures.
- For a spousal RRSP, you can contribute up to December 31 of the year your spouse or common-law partner turns 71.
How to avoid last-minute RRSP contributions
If you want to avoid the last-minute RRSP contribution rush, consider making regular contributions throughout the year. You can even automate the process if you wish. Talk to an Edward Jones financial advisor to learn about the different account options available. You can also sign up for online tools, which provide you with continuous access to your Edward Jones account.
How much can I contribute?
The Canadian Revenue Agency (CRA) determines the amount you are allowed to contribute, based on your income and annual contribution room. The Income Tax Act outlines what types of income affect your contribution room. The CRA usually sends a notice of assessment (NOA) annually, after you’ve filed your current taxes, which includes your RRSP contribution room for the next year.
The general contribution limit, as set by the Canadian government, is the lesser of
- 18% of your previous years' annual earned income, or
- $29,210 for 2022 and $30,780 for 2023.
Opportunity to carry forward unused contributions
The good news is that if you are not able to maximize your RRSP contribution in any given year, your unused contribution room carries forward indefinitely, and you can use it in future years.
For example, if your income is $150,000 a year, your annual contribution room ($150,000 X 18%) is $27,000 for 2022. If you are only able to contribute $13,500, it will leave you $13,500 of contribution room for 2022, which you can carry over to 2023. If you have the same amount of income in 2023, your contribution room will again be $27,000. Because you have $27,000 available contribution room for 2023 and $13,500 remaining contribution room (carryover) from 2022, your total contribution room for 2023 is $40,500. Fortunately, in 2023, you find you can contribute $30,000. Thus, you can contribute the additional $3,000, and it leaves you with $10,500 of contribution room to carry over to future years.
You will want to keep a close eye on your available contribution room because there can be penalties and tax consequences if you overcontribute.
The CRA gives RRSP owners a $2,000 buffer on contributions, meaning you only pay a penalty if you overcontribute more than $2,000. At which time, you will pay a 1% penalty per month on the excess contributions that exceed your RRSP deduction limit by more than $2,000.
RRSP loans to cover contributions
Since RRSP contributions lower taxable income, some individuals want to find a way to make their annual contribution or even maximize their contribution because of financial growth opportunities. That may be challenging if they don’t have the money in hand. One option is to borrow money from a financial institution. Most loans range from 1 year to 10 years and give borrowers 90 days before repayment must begin — which allows them enough time to get their tax refund.
That said, there are several things to consider before choosing that path, including the interest rate for the loan, if the estimated refund will cover the loan repayment, and whether there is enough time to get a loan approved before the contribution deadline.
Although there are limits to the types of investments that can be held in an RRSP, Edward Jones offers many different options, including:
- Mutual funds
- Exchanged-traded funds (ETFs)
- Government Investment Certificates (GICs)
- Corporate bonds
- Government-issued debt obligations
Talk to your Edward Jones financial advisor to determine which qualified investments will best meet your needs.
One of the benefits of an RRSP is that you can withdraw funds at any time. All RRSP withdrawals are fully taxable as regular income. Furthermore, there may be additional costs for nonqualified withdrawals, such as de-registration fees. Additionally, you will lose the contribution room for perpetuity.
Qualified withdrawal exceptions
There are qualified exceptions, which enable you to withdraw funds for specifically approved reasons without having to claim the withdrawn funds as income on your tax return.
- Home Buyers’ Plan (HBP): If you’d like to build or buy a home for yourself or a disabled relative, you can withdraw up to a maximum of $35,000 from your RRSP. Repayments must start the second year following the year of withdrawal. You have 15 years to repay the withdrawal making equivalent annual payments. Any missed payments are added to your income for that year.
- Lifelong Learning Plan (LLP): For educational purposes, you can borrow as much as $10,000 in a year, up to a $20,000 limit. You must repay the money in equal increments within 10 years with repayments beginning no later than the fifth year from the first disbursement.
Collapsing your RRSP
An RRSP matures December 31 of the year the owner turns age 71. At that time, the account owner must choose one of three options and close the account:
- Buy an annuity
- Withdraw the money, declare it as income and pay the taxes owing
- Transfer the funds into a Registered Retirement Income Fund (RRIF)
Note, that you may also use any combination of the above options. Although most people wait until they are either retired or close to retirement, you can open a RRIF and transfer funds from your RRSP to your RRIF at any age. However, once you make a transfer from an RRSP to a RRIF, you will no longer be able to contribute to that particular account, and a new RRSP account would need to be established in order to make future RRSP contributions.
You can contribute, but your contribution will count toward next year rather than the current year.
If you make a contribution at any point after the current year deadline, it will be treated as a contribution made in the following year. Any remaining contribution room you have for the current year will automatically carry forward to future years.
We can help
When it comes to RRSPs, your Edward Jones financial advisor can help you from start to finish, beginning with understanding the basics, determining which investment type will best serve your needs, reviewing your cash flow to fund your RRSP and exploring your RRSP maturity options to support your retirement dreams.