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Eligibility
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Eligibility
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Key Requirements
- All tax payers who have earned income, up to the end of the year they turn 71, may contribute to an RRSP.
- There is no minimum age and you may have more than one plan.
Contributions
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Contributions
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The government determines your contribution limit based on your earned income. You can find your contribution limit on your Notice of Assessment or by going to the CRA website and logging into My Account.
- The annual RRSP contribution limit is 18% of your last year's income, up to a maximum amount. It is important to note that there are penalties for over contributing to your RRSP.
Withdrawals
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Withdrawals
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It is recommended to avoid early withdrawal of RRSPs as there are tax consequences. If you withdraw early, the money you take out will be subject to a withholding tax and will be counted as part of your income for that year. Exceptions include:
- You can borrow from your RRSP to help pay for your first home under the Federal Home Buyer's Plan.
- You can use money from your RRSP to pay for training or education as part of the Federal Lifelong Learning Plan.
Key Product Details
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Key Product Details
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A Registered Retirement Savings Plan (RRSP) is a government approved savings plan allowing you to save money for your retirement. Your contributions are tax deductible and the income in your investment is tax deferred until it is withdrawn from your RRSP Plan.
You can hold a variety of investments in your RRSP. Vermilion Credit Union offers a range of investment options and our team of Financial Advisors to help you get the most from your investments and your retirement.
An RRSP helps to ensure you have money for retirement. It also has advantages when you are still in your working years by providing a tax deduction. There are a number of different types of investments within an RRSP Plan to help you maximize benefits to meet your retirement goals. It's never too early to to start planning for your future.
When you retire, your RRSP turns into a RRIF (Registered Retirement Income Fund) that you can withdraw money from. You must convert your RRSP to a RRIF by the end of the year you turn 71. You can withdraw funds before retirement, but the withdrawals will be subject to income tax and withholding tax, and you will permanently lose that contribution room.
Exceptions to the RRSP early withdrawal penalties are the Home Buyer's Plan, which allows you to withdraw up to $35,000 for the down payment of your first home, and the Life Long Learning Plan, which allows you to withdraw up to $10,000 in a calendar year from your (RRSPs) to finance full-time training or education for you or your spouse or common-law partner.
Contributions may be made to a spousal plan within the contributor's RRSP contribution limits. This strategy can potentially create income splitting between spouses in retirement.
Did you know you can borrow money to contribute to your RRSP? Because RRSP contributions reduce your taxable income, and early contributions maximize compound interest, an RRSP loan may be to your financial benefit. Here's a great article to explain how this works!