The world changes quickly, unexpectedly and sometimes even beautifully. Your planning for tomorrow shouldn’t be overtaken by the realities of today.
This RRSP season, be confident in choosing innovative and quality solutions for your portfolio. Talk to your advisor about Mackenzie’s distinctive ETFs and proven Balanced Funds.
Make conversations with your advisor as productive as possible during this RRSP season.
Here are a few Frequently Asked Questions (plus the answers) about RRSPs.
A: RRSPs help you to save for retirement plus RRSP contributions are tax-deductible and may result in a tax refund. Returns within your RRSP account accumulate on a tax-deferred basis and you can contribute anytime throughout the year and up to 60 days after the end of year. For more details on the benefits of an RRSP, including a complete RRSP checklist, calculators and investment tips, please visit our RRSP page.
A: The RRSP contribution deadline for the 2016 tax year is March 1, 2017. The annual contribution limit is 18% of your earned income for 2016, subject to a dollar limit, plus any unused contribution room carried over from previous years. For 2016, the maximum RRSP contribution limit is $25,370.
A: If you don’t contribute the maximum amount that you’re allowed, you can carry forward the unused portion indefinitely. Your Notice of Assessment will show your unused RRSP contribution room.
Over-contributions to an RRSP are subject to an over contribution penalty tax. Where over-contributions exceed $2,000, you will be assessed a 1% per month penalty tax until the excess is withdrawn or additional contribution room becomes available.
A: Generally you can hold mutual funds, ETFs, equities, bonds, cash and a variety of other investments in your RRSP. Speak to your advisor to ensure your portfolio includes suitable investments to your needs. The 2005 Federal Budget eliminated the foreign property limit for tax-deferred retirement plans. You are no longer restricted to holding up to 30% of foreign investments in your portfolio.
A: You can withdraw money from your RRSP but the amount you withdraw will be included in your income as fully taxable ordinary income. You will have to pay withholding tax when you withdraw (Note: there are withdrawal restrictions if you have a locked-in RRSP). You might also have to pay additional tax on the withdrawal when you file your tax return for the year with credit for any withholding tax previously withheld.
The federal government offers two programs where you can take money out for your RRSP without tax, provided the amounts are re-contributed to the RRSP over time. The Home Buyers’ Plan (HBP) allows a first-time homebuyer to withdraw up to $25,000 for the purchase of a new home. The Lifelong Learning Plan (LLP) lets a student (or a spouse) withdraw $10,000 per year, up to $20,000, to fund full-time education or retraining. Repayments under the HBP must occur within a 15-year period. Repayments under the LLP must occur within a 10-year period.
A: You must wind up your RRSP by the end of the calendar year in which you reach age 71, typically by way of transfer to a Registered Retirement Income Fund (RRIF). However, you may convert to a RRIF at any time before age 71.
Don’t wait for your financial institution to tell you that it’s time to convert. If you don’t choose a RRIF (or annuity) by the end of the year in which you turn 71, the financial institution that holds your RRSP could cash it in and send you the cash less any income taxes which must be withheld. Where this occurs, the total value of your cashed-in RRSP will be added to your income for the year. It’s up to you and your financial advisor to avoid a big tax bill at the end of the year in which you turn 71.
Invest with confidence this RRSP season by choosing innovation, quality and performance.
Our equity and fixed income ETFs are designed to enhance diversification, improve risk management and seek improved risk-adjusted returns.
Our suite of proven balanced funds aims to deliver solid returns over time.
Distinctive ETFs. Proven Balanced Mutual Funds. Confident choices.
The content of this webpage (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.
This should not be construed to be legal or tax advice, as each client’s situation is different. Please consult your own legal and tax advisor.