The first few months of a year are always a busy time. But these first months are also excellent for financial planning for the year and your future, which may also include last-minute investment opportunities.
For example, the RRSP contribution deadline is March 1 in 2023. Maxing out your annual contributions is one way to help offset a tax bill. Long-term investing like this also comes with its own benefits.
What Is an RRSP
An RRSP, also known as a registered retirement savings plan, is registered with Canada Revenue Agency (CRA). You contribute your pre-tax income to it, which remains tax exempt until it’s withdrawn, at which point the CRA taxes it.
Types of RRSP
If you have no spouse, an individual RRSP is one of your primary options. But a spousal RRSP can be an option that benefits one spouse while providing a tax benefit for both. Other RRSPs include group and pooled RRSPs. Both of these are typically offered in business settings where a group of people is paying into a fund.
2023 RRSP Contribution Deadline
The contribution deadline for RRSPs from the 2022 tax year is March 1, 2023. Having your contributions in by this date ensures they count against the correct tax year’s income.
Contributions Limits for RRSPs & TFSAs
Year over year, contribution limits on various savings and retirement plans increase. For example, in 2022, the RRSP contribution limit was $29,210. Whereas in 2023, your contribution limit is $30,780.
Some important contribution limits for 2023 include:
- Registered retirement savings plan (RRSP): $30,780
- Deferred profit sharing plan (DPSP): $15,780
- Advanced life deferred annuity (ALDA): $160,000
- Tax-free savings account (TFSA): $6,500
What Can Affect Contribution Limits
The above contribution limits are the maximum allowable contribution. Your actual contribution limits may vary. Unused deduction room from previous years, your income, and the maximums may affect your contribution limits in future years.
Additionally, receiving benefits from an employer’s registered pension plan (RPP) could result in a pension adjustment (PA). This adjustment could result in a reduction of the following year’s RRSP contribution limits.
Investing in an RRSP
Setting up an RRSP isn’t difficult, especially in today’s increasingly digital world. Many major banks offer various plans and make things user friendly. But when you’re planning for retirement, it’s about more than just figuring out the max amount you can save. So, it may be beneficial work with a financial planner who can help you reach your financial goals.
For example, a large one-time contribution to an RRSP before March 1 this year may help offset taxes. At the same time, a last-minute RRSP may not be the best option for your situation. Perhaps, investing in another area would benefit you further and provide you a greater return. A financial planner can help you with these decisions.
What Happens If You Don’t Max Your Contributions
If you’ve never invested in an RRSP, you haven’t lost out on annual contribution limits. If you are only using part of your limit, you can still carry over the remainder to the following year.
What Happens If You Go Over Your Contribution Limit?
If you stay within $2,000 of the limit, the CRA won’t impose any penalty on your contributions if you exceed your contribution limit. But if you’re past that mark, you pay a 1% penalty on every dollar over $2,000.
Two possible ways out of this penalty are:
- Withdrawing the excess contribution before month end
- Moving the excess contribution to a suitable group plan
Talk to an Advisor About Your RRSP Contributions
Planning for your future shouldn’t be a stressful experience. There are plenty of free resources online that you can use to increase your understanding.
The financial world is always changing, so it’s important to seek advice from professionals with experience who demonstrate transparency and integrity in all their dealings.
Qopia Investments is a trade name of Aligned Capital Partners Inc. (ACPI). ACPI is regulated by the Investment Industry Regulatory Organization of Canada (www.iiroc.ca) and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Qopia Investments is registered to advise in securities and mutual Funds to clients residing in Alberta, Ontario, Saskatchewan, and British Columbia. This publication is for informational purposes only and shall not be construed to constitute any form of investment advice. The views expressed are those of the author and may not necessarily be those of ACPI. Opinions expressed are as of the date of this publication and are subject to change without notice and information has been compiled from sources believed to be reliable. This publication has been prepared for general circulation and without regard to the individual financial circumstances and objectives of persons who receive it. You should not act or rely on the information without seeking the advice of the appropriate professional.
Investment products are provided by ACPI and include, but are not limited to, mutual funds, stocks, and bonds. Non-securities related business includes, without limitation, fee-based financial planning services; estate and tax planning; tax return preparation services; advising in or selling any type of insurance product; any type of mortgage service. Accordingly, ACPI is not providing and does not supervise any of the above noted activities and you should not rely on ACPI for any review of any non-securities services provided by
Investment products are provided by ACPI and include, but are not limited to, mutual funds, stocks, and bonds. Non-securities related business includes, without limitation, fee-based financial planning services; estate and tax planning; tax return preparation services; advising in or selling any type of insurance product; any type of mortgage service. Accordingly, ACPI is not providing and does not supervise any of the above noted activities and you should not rely on ACPI for any review of any non-securities services provided by Qopia Financial.
Any investment products and services referred to herein are only available to investors in certain jurisdictions where they may be legally offered and to certain investors who are qualified according to the laws of the applicable jurisdiction. The information contained does not constitute an offer or solicitation to buy or sell any product or service. Past performance is not indicative of future performance, future returns are not guaranteed, and a loss of principal may occur. Content may not be reproduced or copied by any means without the prior consent of the author and ACPI.
Disclosure of commissions in mutual funds in accordance with NI 81-102 (15):“Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated”.
I help the disengaged investor reach their financial goals by taking the guesswork out of their investment strategy and bringing clarity to their financial plan. Let me build a personalized plan and help you reach financial independence.
From the beginning of my career, my biggest goal has been making sure clients feel like they have been given unbiased, expert advice. In an industry with very little transparency between the advisor and the client, not to mention the low barriers of entry, it is imperative for clients to have justified service for the costs they pay.