It’s RRSP Season. Have You Contributed?
It’s a new year, and with it comes the pressure to review your finances, prep your tax filings and make your final Registered Retirement Savings Plan (RRSP) contributions.
Did You Know?
Any RRSP contributions made in the first 60 days of a calendar year can be used to offset income for the current year or to offset income for the previous year.
What Are the Benefits?
An RRSP is a personal savings account with special tax advantages. What makes it so attractive is that your contributions are tax deductible and the taxes on any investment growth are deferred until you take your money out. Tax-deductible contributions mean you’ll have more of your income available for your current needs, even while you’re saving for the future. Tax-deferred investment growth keeps more of your money working for you.
An easy way to enhance your RRSP savings is to take advantage of savings programs at work. Employers often match at least part of your contribution, or they’ll offer RRSPs with lower management fees than you might get as an individual from most investment firms. In most cases, when you contribute a percentage of your pay to an RRSP through a work plan, the contributions are deducted from your pay cheque before income tax is. This means you can put money away for your retirement goals with more net income to cover your current needs–all while reducing your taxable income.
Another major benefit of an RRSP is it allows your contributions to grow tax-free. This means you don’t have to pay capital gains taxes when you sell stocks or funds at a profit, and you don’t have to pay tax on dividends or interest that you receive in cash. The money in your RRSP will eventually be taxed when you withdraw it; however, since most people will earn less income in their post-working years than while actively employed, those withdrawals should end up being taxed at a lower rate.
What’s the RRSP Contribution Deadline?
The deadline to contribute to your RRSP for the 2015 tax year is February 29, 2016*. Don’t miss the opportunity to minimize your income tax owed for 2015 and boost your retirement savings.
*It’s your responsibility to stay within Canada Revenue Agency (CRA) limits when contributing to your RRSP. Refer to the Notice of Assessment you received from the CRA to confirm your RRSP limit.