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RRSP tips

RRSP Season Is All Year Round

Although the official deadline has passed now to be able to use your RRSP contributions for the 2010 tax year, it doesn’t mean that RRSP season is over. In fact, it is better to contribute to your RRSP all year round than wait until the last possible minute to put a lump sum into it.

This year I challenge you to set up automatic payments into your RRSP every time you get paid. That way you will not have to burden yourself with coming up with a lump sum every year. If you discover that you still want to put in more, then you can top up your contributions before the deadline, but the lump sum will be far less of a burden.

June 6, 2011

Taxes

Should I Contribute To My RRSP This Year?

Canadians have until March 1^st to make an RRSP contribution towards their Registered Retirement Savings Plan (RRSP) in order to take advantage of a tax deduction for the 2010 tax year.

Before you make this important decision, be sure to consider a few things:

Do you have the ability within your budget to make a contribution?

If you haven’t been contributing regularly all year, have you set enough money aside in order to make a lump sum contribution?

If you will be dipping into your emergency funds in order to make your contribution or you will be left just scraping by, then perhaps it is wise to just hold off in making any contributions this year. Why? Because if you are depending on your RRSPs as a back up emergency fund then there is no point in putting money into an RRSP in the first place. There are just too many tax penalties and negative implications for making an RRSP withdrawal.

January 20, 2011

Investing

When Is It A Good Idea To Have An RRSP?

Most Canadians are aware of the existence of Registered Retirement Savings Plans (RRSPs) but they really do not know much about how they actually work or how they can use them to benefit them fully. Until just a few years ago, I thought that once you turned age 65, you were allowed to take the money out of them. How little did I know! Unfortunately most Canadians are still in the dark about RRSPs and when it is wise to use them.

RRSPs can be especially useful for regular employees who pay a lot of tax on their employment income. By contributing to an RRSP, they are allowed to defer their income tax. They benefit from lower taxes payable now, and then will expect to pay it later when they withdraw it (presumably when they retire and are at a lower tax bracket).

December 5, 2010

Taxes

Withdrew Money From Your RRSP in 2010? You Might Have An Unexpected Tax Bill

With the economy still uncertain, some Canadians have turned to their Registered Retirement Savings Plan (RRSP) as a source of funds. But there could be tax consequences on your 2010 tax return.

Lose your tax shelter: RRSPs are designed to help Canadians save for retirement and provide a tax shelter for the funds. You lose the sheltering benefits when you make a withdrawal.

November 27, 2010

Taxes

Did You Overcontribute To Your RRSP?

You can overcontribute to your RRSP by up to $2,000 without being penalized. However, you cannot claim a deduction for the excess amount.

If you overcontribute by more than $2,000, you are subject to a one per cent penalty tax for each month you are in excess of that. You have to complete a T1-OVP Individual Tax Return for RRSP Excess Contributions to calculate the amount of the overcontribution and penalty tax. This form must be filed, and the tax remitted, within 90 days from the end of the year (March 30, 2011 if there was an excess amount in the plan at the end of a month in 2010.)

November 25, 2010

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