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Retirement Planning
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Facts and more about your 2007 RRSP

Once again, it is RRSP season - the time where we all scramble to make last year's RRSP contributions to get the tax deduction. However, making RRSP contributions is not just about reducing taxation, it is about planning for a dream. That dream is financial independence.

One day you may want to take it easy, enjoy life. This does not mean you have to quit working, but it will mean getting out of the rat race and doing the things you have been putting off -taking up a hobby, traveling the world, spending more time with children and grandchildren or just spending more time at the cottage. The RRSP is one vehicle that can help you save money in a tax effective manner to live your dream. When looking at contributing to an RRSP, it's important to understand the details regarding RRSPs. The rules governing all RRSPs are set out in the Federal income Tax Act and are administered by Canada Revenue Agency. Below we have tried to summarize some of the key aspects you should know about RRSPs.

RRSP Contribution Maximums

• in 2006, the dollar limit is $18,000
• in 2007, the dollar limit is $19,000
• in 2008, the dollar limit is $20,000
• in 2009, the dollar limit is $21,000

Your allowable RRSP contribution for the current year is the lower of:

• 18% of your earned income form the previous year, or
• The maximum annual contribution limit for the taxation year, or
• The remaining limit after any company sponsored pension plan contributions.

Earned income includes salary or wages, alimony received, and rental income, among other income sources, but does not include items such as investment income. You can find the exact amount you can contribute to your RRSP for the current year on the Notice of Assessment you receive from Canada Revenue Agency after they process your previous year's tax return.

Company Pension Plan or Deferred Profit Sharing Plan

As a member of a company-sponsored registered pension plan or deferred profit sharing plan, the amount that you can contribute to your RRSP must be reduced by the total value of the pension credits you earned for the year:

This amount is referred to as a pension adjustment (PA) and it is reported on the T4 slip (Statement of Remuneration Paid) that you receive from your employer.

Annual Contribution Deadline

To be eligible for an RRSP deduction in a specific taxation year, you can make contributions anytime during the year, or up to 60 days into the following year. However, we would recommend that you make your RRSP contribution as soon as possible.


If you can't make your maximum contribution one year, you can make up that portion of the contribution in later years by carrying it forward. The amount of your unused contribution limit is shown on your federal Notice of Assessment.

You may also choose to delay claiming your current year's RRSP tax c deduction. To take the deduction in a later year, you must make sure that your allowable deduction limit has not been reached.

You may even consider taking a loan to bring your RRSP contributions up to date depending on your tax situation for 2006.

Over-contributing to your Plan

If you make an RRSP contribution beyond your maximum allowable amount for a year it is considered an over-contribution. There is a lifetime allowance of $2,000 for over-contributions. These contributions must be used before any new contributions are applied.

Home Buyer's Plan

The Home Buyer's Plan allows you to borrow funds from your RRSP to purchase your first home. Here are some of the key facts:

You and your spouse can each borrow up to $20,000.

  • The funds must have been on deposit at least 90 days before you withdrew them.
  • At least I / 15 of the funds must be repaid each year, beginning two years after the funds were withdrawn.
  • A signed agreement to buy or build a qualifying home is required.
  • You can only participate in the program once.

Lifelong Learning Plan

The Lifelong Learning Plan allows you to pay for training or education with RRSP funds. Here are some of the key facts:

  • You can withdraw up to $ 10,000 per calendar year to finance full-time training or post-secondary education,
  • The student can be you or your spouse, but not your children.
  • If the student meets disability requirements, then the training/education can be on a part-time basis.
  • The total amount that can be withdrawn is $20,000 with withdrawals over a maximum of four consecutive years.
  • Amounts that are withdrawn are not subject to taxes on withdrawal.
  • At least 10% of the amount borrowed must be repaid each year, over a maximum period of 10 years.

Separation or Divorce

During separation or divorce, either you or your spouse can transfer existing RRSPs to the other, without being subject to tax, provided that:

  • You are living apart when property and assets are settled; and
  • You have a written separation agreement or a court order.

Death of a Plan Holder

In the event of death, the proceeds of your RRSP are distributed to whoever was named as your beneficiary or to your estate, if no beneficiary has been designated. This designation can be specified in either your RRSP or in your will. Quebec residents must make the designation by will or marriage contract for most plans.

The proceeds of the RRSP will remain tax-sheltered if one of these situations applies:

Your surviving spouse is the beneficiary, and the proceeds are transferred into an RRSP or a Registered Retirement Income Fund (RRIF) in his/her name;

You have no surviving spouse, but you have children or grandchildren who are minors named as your beneficiaries. They are dependent on your estate for financial support and will have the proceeds transferred to a term annuity registered in their names; or Children or grandchildren, regardless of age, who are financially dependent because of physical or mental infirmity. The RRSP proceeds will be transferred to an RRSP or RRIF registered in their names, or used to purchase an annuity.

In all other situations, the balance of the RRSP at the date of death is included as income on the plan holder's final tax return.

Making RRSP contributions and managing the investments properly is a very important aspect of your financial plan. Great care and attention should be made to how your RRSP is invested based on your tolerance for risk and time horizon. This year, we are reviewing all of our clients RRSP portfolios and making recommendations on how to manage them effectively to live your dream.

Featured RRSP Reading

In or out? It depends on what you have
"Just get it in there" is the phrase often used by financial experts, meaning that if you just make that RRSP contribution today, whether parking it in a short-term vehicle such as an investment savings account or a money market fund, you can decide how to properly invest those funds later on. Sadly, investors often procrastinate and never book that second appointment with their financial advisor, so their RRSP contribution languishes in low interest paying vehicles for months, even years, before being strategically reallocated to more appropriate investments to grow for retirement.

 Looking for RRSP answers

RRSP Questions & Answers
Tips and more to help you make the most of your RRSP!
Factors to weigh when choosing your RRSP investments
Why RRSPs should be the cornerstone of your portfolio
The types of RRSP options you have
Plan for a comfortable retirement
RRSP contribution or mortgage repayment?
Finding the Money to Invest
How to analyze risk

 Financial Tools on Retirement Savings Plans

Need some assistance when it comes to retirement planning? Try out our selection of calculators and worksheets for a better understanding of your retirement saving situation.

RRSP POP Quiz - Discover how RRSP-literate you are with our quick, 10 question multiple choice quiz.
Retirement Planner - Aids you in better understanding what your monthly retirement income needs will be.
Retirement Savings and Income Calculator - Can help you discover what you may need to ensure the retirement you're planning for.
Advantage of early investing - Provides a surprising incentive to start retirement savings early.
RRSP rate and return comparison - Illustrates differences in rates of return. See rates you define or compare institutions in our rate tables.


Quick Nav, our section-specific navigation system provides RRSP info at your fingertips. Connects you to our RRSP content, including newsletters, our Special Retirement Glossary, Questions & Answers, tips, strategies and more.

RRSP Interest Rates

RRSP GIC 1 to 5 year terms


Special Report - RRSP Information & Interest Rate Surveys
We've compiled a selection of retirement savings plans offered by various financial institutions into a comparison table for your reading. The 2 available include:

Selected Retirement Savings Plans - GICs Fixed Term, Non-cashable

What your savings earn - Retirement Savings Accounts

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IP-Profiler: Retirement
We have also taken the opportunity to compile a reference section for retirement-related investment products, known as the IP-Profiler. It provides a detailed look at the various products available and contains information on deposit levels and applicable fees.
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Using RRSP overcontributions to your advantage
CDIC - Protecting Your Deposits
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Advantages to Early Investing Calculator
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