Retirement Savings FAQ

The sooner you open your RRSP account and begin contributing, the more savings you will have when you retire. It’s important to note the higher your income, the more you will benefit from contributing to your RRSP. Depending on your current income, your future income expectations, and overall financial goals, we may recommend a TSFA contribution for your individual circumstances.

For the 2023 tax period, the RRSP limit is 18% of your 2023 gross income, or $30,780, or whichever is less. To avoid over contribution penalty,  please confirm your accumulated contribution limit with your current Notice of Assessment.

Yes, your RRSP investment can be taken out before you retire, but should be reserved for retirement, purchasing your first home, or full-time school tuition. If you are saving for anything else, including children, travel, home renovations or debt, an RRSP will not support these goals.   

The Canadian government’s Home Buyers’ Plan (HBP) allows first time home buyers to borrow up to $35,000 from your RRSP for a down payment, tax-free. 

RRSP contributions are not taxed and neither is interest earned from these savings plans. Any profits made on investments within an RRSP account in the form of interest and will not be taxed. 

Since withdrawals are taxable, any withdrawals are immediately subject to withholding tax. You’ll be taxed, depending on the amount you withdraw. If you withdraw up to $5,000, the withholding tax rate is 10%; if you withdraw between $5,001 and $15,000, the withholding tax rate is 20%; and if you withdraw more than $15,000, the withholding tax rate rises to 30%. 

The tax that was withheld may not always be enough to account for the tax you owe at your tax bracket. You may have to pay more tax on the withdrawal when you include the withdrawal on your income tax and benefit return for that year.

At the age of 71, your RRSP will be collapsed and converted into a RRIF (Registered Retirement Income Fund) or you can convert it into a regular stream of retirement income. If you choose a RRIF, you can select the investments, income frequency, and amount of income. You can also make changes to all of these aspects in the future. 

Yes, when you begin making withdrawals from your RRSP, these withdrawals are considered taxable income. The amount you’ll be taxed depends on your tax bracket and income during your retirement years. Typically people are in a lower tax bracket during retirement, so the taxes on your withdrawals will be lower.  

If your income is higher than your spouse, you can help build their tax-sheltered savings by contributing to a spousal RRSP. Retirement income will then be split more equally between the 2 of you. As a result may reduce the total amount of tax you pay.  

You are subject to a penalty tax, depending on how much you over-contribute. If you over-contribute by more than 2000, you will subject to a 1% penalty tax for each month that you are over. In the case of over-contributions, you are required to complete a T1-OVP Individual Tax Return for RRSP Excess Contributions to calculate the amount of the over-contribution and penalty tax.  

A TFSA (Tax Free Savings Account) allows investments to grow tax-free. However, a TFSA contribution will not provide you with the tax-deduction benefits like your RRSP investment. A high interest TFSA is ideal for more immediate financial goals, but can be used for retirement in certain cases. Depending on your current income, your future income expectations, and overall financial goals, we may recommend a TFSA contribution for your individual circumstances. 

View our TFSA and RRSP comparison sheet 

You set up an RRSP through a financial institution such as a credit union, bank, trust or insurance company. Our expert advisors can walk you through the different types of RRSPs and the investments they can contain. We can help you find the cash you need for retirement! Book an appointment today.