Registered Retirement Savings Plan
Purpose of an RRSP
A Registered Retirement Savings Plan is a savings plan that is 'registered' with Canada Revenue Agency (CRA). It allows you to save money for your retirement on a tax-sheltered basis. That means you don't pay tax on the income your investments earn until you withdraw the money from your RRSP.
2022 Contribution Details and Deadline
If you haven't already made your RRSP contribution, don't delay.
The RRSP contribution deadline for the 2022 tax year is March 1, 2023.
In addition, you are now able to make your 2023 contribution. The contribution limit for this year is $30,780.
The maximum RRSP deduction limits are as follows:
- 2021 - $27,830
- 2022 - $29,210
- 2023 - $30,780
Please contact our office to make a contribution or mail a cheque to:
BMO Nesbitt Burns
Attn: Jan Canning
2300 - 885 West Georgia Street
Alternatively, you can deposit your contribution directly to your BMO Nesbitt Burns account at any BMO Bank of Montreal branch or through your bank's online banking, or telephone banking. For further assistance, please do not hesitate to contact our office at your convenience.
Dont' Wait to Make your RRSP Contribution
Statistics show that 80 per cent of RRSP owners make their contributions in the last two weeks of February. By doing so, these people effectively lower the value of their RRSPs.
As RRSP contribution room is based on your prior years earned income, your current year limit is known on January 1st. A smart strategy is to contribute as early in the year as possible in order to take maximum advantage of the tax deferred growth of an RRSP.
For example, if you had contributed on January 1, 2014 rather than wait until March 2, 2015 for the 2014 tax year, the money would be in your RRSP for an additional 14 months. Compounding, especially over a number of years, can have a profound effect on the total value of your RRSP. If you contributed $5,000 on January 1st each year for 30 years and earned an eight per cent return, you would have $57,279 more money in your RRSP than if you make your annual contribution on March 2nd of the following year.
Retirement Planning for Small Business Owners
Many small business owners choose to receive their remuneration in the form of dividends because of the lower tax rate on dividends, but we caution that you shouldn't forego a salary in favour of dividends just for the tax savings; instead, determine the optimal salary/dividend mix that will minimize both corporate and personal income tax, and maximize RRSP and CPP/QPP contributions. An Individual Pension Plan (IPP) is an attractive alternative to an RRSP for owner-managers 45 years of age or older. An IPP is a defined benefit pension plan for owner-managers and their spouses. The corporation makes tax-deductible contributions to the IPP based on actuarial valuations and, in return, the member receives a guaranteed lifetime pension at retirement.
Don't wait to make your RRSP contribution! Contribute as early as possible and ensure you maximize your contributions each year.
Saving for retirement is an important financial goal. The amount that you are able to save in your working years will affect your quality of life throughout retirement. For more information, visit RSP information center, or contact Jan Canning.
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