Page 74 - A Canuck's Guide to Financial Literacy 2020
P. 74
74
Maximum Age Restriction Contributions
An account holder is allowed to make RRSP contributions up until the end of the year that
they reach age 71. After age 71, the RRSP must be converted into a Registered Retirement
Income Fund, also known as a RRIF. You may also purchase an annuity. If you have a
spouse and they're younger than you, you're allowed to open a Spousal Registered Savings
Plan and take advantage of tax benefits after the age of 71 by contributing into the spousal
RRSP, pending you have contribution room. Contribution room can be generated if the
taxpayer continues to work after 71.
Carry Forward Room Contributions
Taxpayers who aren't able to maximize their RRSP contribution room are allowed to carry
the unused portion forward indefinitely, up until 71 when it's usually converted into a RRIF.
Example: If you had available contribution room of $8,000 in 2018, $5,000 in 2019 - in
2020, you're allowed to contribute $13,000.
RRSP Contribution Deadline
It's important to keep in mind the contribution deadline in order to take advantage of the tax
benefits that RRSPs provide. To take advantage of the tax savings for the current year:
• An individual can contribute into their RRSPs in the current year and up to 60
days after the end of the year.
o Example: Joe decided to hold off contributing into his RRSP for 2019 until
February 14th, 2020. Joe is eligible to receive a tax benefit for 2019.
RRSP Over Contribution Penalties
A tax payer is allowed to over contribute up to $2,000 above their available room without
any penalties. If you have excess contributions above this amount, there is a 1% per month
penalty. It's important that you withdraw this excess amount as soon as possible.
If you are aware that you over contributed into your RRSP, you must fill out the Individual
Tax Return for RRSP, PRPP, and SPP Excess Contributions form. You must complete it
and send it to the CRA. The applicable tax must be due within 90 days after the calendar
year in order to avoid late fees and interest. If you fail to pay within 90 days, the CRA will
penalize you:
