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20 things to know about RRSPs in 2024

Whether you're early in your retirement planning journey, or well along the road, we all have questions.
At SCU we have the answers to help you plan your retirement  and the advice to help you reach your financial goals.

Here are 20 great questions to get you started

1. What is an RRSP? A Registered Retirement Savings Plan (RRSP) is a tax-deferred savings plan designed to help you meet your retirement savings goals. Contributions to an RRSP are tax-deductible, and investment growth within the account is tax-deferred.

2. What’s the difference between tax-deferred and tax-deductible?
Tax-deductible means that the amount of your RRSP contribution is deducted from your taxable income. This reduces the income you have to pay income taxes on, and instead defers any taxes until you withdraw the funds. 

3. Does an RRSP offer tax-free savings?
No, RRSPs are tax-deferred, meaning you will be taxed when you withdraw the funds. Any of your earnings in an RRSP, whether interest, dividends, or capital gains are also tax deferred, meaning you don’t pay tax at the time you earn. Contributing to an RRSP when your income is higher means you’ll enjoy tax savings at the time of contribution. Then, when you withdraw the funds, your income will be generally lower, so you’ll pay less tax overall.

4. I heard that RRSPs are not the best investment because of the high taxes. Is that true?
No. There’s a common misconception that RRSPs aren’t beneficial because you’ll have to pay a lot of tax when you withdraw funds. RRSPs are a valuable investment because you contribute to them when you’re working and your income is higher, so you receive tax benefits on your contributions. Then, when you’re no longer working and begin to draw on these funds, your income is lower, so you’ll pay less tax overall. As with many financial decisions, everyone’s situation is different, so working with an expert will help you determine what mix of investments is best for you.

5. How old do you have to be to open an RRSP?
There's no minimum age for opening an RRSP. However, you must receive employment or business income to earn contribution room and must be over 18 years old to contribute more than $2,000 a year. 

6. How much can I contribute?
The Federal government allows you to contribute up to 18% of your gross income each year (visit our RRSP page for maximum contribution limits). If you contribute to a company pension, this counts toward your total contribution limit. And, if you haven’t maxed out your contributions from previous years you may have more contribution room available.

7. Where can I find out if I have contribution room?
Your Notice of Assessment from the Canada Revenue Agency (CRA) will indicate your contribution limit  for the year. You can also access this information through the CRA secure portal: :

8. When is the contribution deadline?
The deadline for contributing to an RRSP for a particular tax year is usually March 1st of the following year. However, if March 1st falls on a weekend or holiday, the deadline is extended to the next business day. 

9. What happens if I over-contribute to my RRSP?
There is a lifetime over-contribution limit of $2,000, beyond which penalties may apply. It's important to monitor your contribution room to avoid exceeding the limit.

10. I’ve maxed out my contributions for the current tax year, can I still contribute in January and February of the following year?
Yes. Contributions made in January and February can count for either contribution year. 

11. Can I hold various types of investments within my RRSP?
Yes, RRSPs can hold a variety of investments, including variable savings, GICs, as well as mutual funds, stocks, or bonds. Learn more about RRSPs

12. Can I automate my RRSP contributions?
Yes, you have the option to self-manage your contributions through digital banking, setting up regular, preauthorized transfers directly to your RRSP account. To get started, simply give us a call at 1.800.728.6440.

13. Should I change my investment mix within my RRSP as I get older?
A good rule of thumb is to review your investment mix every one to three years, or any time you experience a significant life change. Contact SCU today and we'll work with you to understand your goals and timeline, and help you choose the products that will best serve your unique needs. 

14. What factors affect my investment mix?
The most significant factor when determining the best investment mix is how close you are to retirement. The best mix depends on your goals, and these are often based on your age, income, and stage of life. As your needs change, so should the mix of savings and investment products change to support these new goals. If you plan to purchase a home, your savings plan will differ from someone who is planning to retire soon. It’s a good idea to speak with an advisor regularly to evaluate your investment mix and assess whether your plan best meets your short-and long-term goals.

15. Can I withdraw money from my RRSP before retirement?
Yes, you can withdraw money from your RRSP before retirement, but withdrawals are subject to withholding taxes, and the amount withdrawn is added to your taxable income for the year.

16. What is the Home Buyers' Plan (HBP) and Lifelong Learning Plan (LLP)?
The HBP allows first-time homebuyers to withdraw up to a specific amount from their RRSPs to purchase or build a qualifying home. The LLP allows you to withdraw funds from your RRSP for full-time education or training for you or your spouse. Don’t forget that you can also save for a downpayment for your first home with the First Home Savings Account (FHSA). Learn more about saving with an FHSA. 

17. How else can I maximize my RRSP contributions?
An investment loan can help you meet your RRSP goals by providing easy access to funds whenever you are ready to invest. With interest charged only on the outstanding balance and a low borrowing cost for our members, a Registered Investment Loan or Link Line is one solution to help you maximize your contribution. 

18. How do I know how much I’ll need?
It’s not easy to know how much money you’ll need to save for retirement, but a great place to start is with the retirement nest egg calculator available on our website within the Retirement Planner Calculators. This tool can help you determine how much money you need to save for retirement by using information like your age, the age you want to retire, and your current annual income. Play around with this tool to find the best retirement age for your financial situation or to help you decide how much you need to start saving. It’s a great tool to use at any stage in your retirement planning.

19. What happens to my RRSP when I retire?
When you retire, you have several options for your RRSP. You can convert it into a Registered Retirement Income Fund (RRIF), purchase an annuity, or take it out as a lump sum, subject to taxes.

20. Is there an age limit for contributing to an RRSP?
You can contribute to an RRSP until December 31 of the year you turn 71. After that, you must convert your RRSP into a retirement income option, such as a RRIF.

Take the next step
If you'd like to get started, you can open an RRSP online today.
Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. This article is provided as a general source of information and should not be considered personal financial or investment advice or solicitation. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete.

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