• Laurie Chermaz

The RRSP Deadline is March 1st, 2018 (but what are RRSP's and what do they mean to ME?)

Tax Pro Niagara can help you figure out your RRSP contribution questions before the deadline passes!

What are RRSPs?

An RRSP (Registered Retirement Savings Plan) allows you to save and invest money for retirement. When you make a deposit to your RRSP this creates an income tax deduction that you can use in the current year or use on a future year’s income tax return. Tax deductions reduce your taxable income for the year and this often results in an income tax refund at tax time.

Any money in your RRSP grows tax-deferred. Any interest and/or dividends received are not taxed in the year they are earned. Similarly, any growth that is not from interest or dividends (capital gains) is also not taxed in the year it is realized.

The only time you pay tax related to an RRSP is when you make a withdrawal from the RRSP, except in certain circumstances. That tends to be missed or forgotten by a lot of people. Eventually you will have to pay tax on everything in your RRSP account(s).

Is an RRSP for you?

The biggest benefit of an RRSP is tax deferral, and to a lesser extent, tax avoidance. If your marginal tax rate (that is the tax rate that applies on the next dollar you earn) is the same when you withdraw the money as when you deposited it, you will have deferred the tax that was owing (as well as deferring tax on any gains).

If your marginal tax rate was very high when you deposited the money in the RRSP, say 40%, and lower when you withdraw it, say 30%, then you will have deferred as well as avoided some income tax.

The worst case occurs when your tax rate when you withdraw from your RRSP is higher than when you contributed. In that case, the tax rate you pay on the withdrawals could be higher than the tax deduction you got when you made the RRSP contribution.

Rule of Thumb

If you earn less than $50,000 a year and don’t expect this to increase much through future promotions or a career change, then an RRSP is probably not right for you. Instead, you should probably save for retirement in a TFSA. The only caveat to that is, if your employer offers RRSP matching, you should take full advantage of that matching and then anything else you want to save towards retirement should go into a TFSA.


Did you know that Tax Pro Niagara has a Checklist for almost every Tax Situation? It's True...take a look online (or click the link below) and you can find a checklist to help get you ready for your upcoming Tax Appointment. There are lists for Regular Taxes, Rentals, Employment Expenses, Moving Expenses and even Small Businesses.

Just Click on the "Appointment Checklists" button on the homepage at www.taxproniagara.com and let the organizing begin!

Still have questions? Get a hold of us on our Contact Us Page, and we will be happy to answer any questions you have.

We are here to help you PREPARE.



4 views0 comments