10 February, 2020

Plan Well, Retire Well

Did you know that only 22% of tax filers in Canada added to their Registered Retirement Savings Plan (RRSP) in 2017?1 The takeaway: Many Canadians aren’t contributing to their retirement plans, and therefore run the risk of falling short of their retirement goals. RRSPs should be part of Canadian investors’ retirement plans. By contributing what you can to these tax-advantaged vehicles consistently, year-over-year, you can benefit from tax-deferred investment growth, which can help achieve your overall retirement goals.

With RRSP season just around the corner, you have another opportunity to revisit these goals and focus on retirement planning. As you re-examine your financial future, here are some RRSP basics to remember.


Anyone living in Canada with employment income and a SIN number who has filed a tax return can contribute to an RRSP account. You can make RRSP contributions until December 31 of the year you turn 71.

Maximum contribution limits

The maximum RRSP contribution rate is 18% of your earned income (up to $26,500 in 2019) and the deadline for contributing is February 29, 2020. Don’t worry if you can’t use up all your RRSP contribution room in a given year – you can carry forward unused contribution room indefinitely. However, do keep an eye on exceeding your limit to avoid a penalty tax of 1% monthly on overcontributions above a cumulative lifetime exemption of $2,000.

What’s my limit?

Your RRSP contribution limit is unique to you and depends on your level of employment income, employer-sponsored pension amounts, and how much you’ve previously contributed to your RRSP. You can find out your limit on your latest notice of assessment or by going online to the Canada Revenue Agency’s “My Account” service.

2020 RRSP contribution deadline

Contributions made in the first 60 days of the year can be applied against the previous taxation year or in any subsequent year. The deadline for an RRSP contribution is always 60 days after the end of the previous year for it to be eligible for a deduction in the current tax year. This year, the RRSP deadline is February 29, 2020.

Spousal RRSPs and income splitting

Is your income significantly higher than your spouse’s? Or perhaps the reverse is true? With a spousal RRSP, the higher income earner contributes to the plan, but it remains in their spouse or partner’s name and is under their control.

The purpose of a spousal RRSP is to help close any gap in income between a couple in retirement. The higher income earner can deduct any eligible contributions they make to a spousal RRSP from their income, just like an RRSP. In retirement, their spouse will have to claim any withdrawals from the plan as income. However, by being in a lower tax bracket, they’ll owe less tax, on a relative basis.

Note that if you have both regular and spousal RRSPs, your deduction limit is the maximum amount you can contribute across your accounts combined. Couples can contribute to their spousal RRSP until the end of the year the younger person turns 71.

Enjoy the advantages of early contribution

With RRSPs, time is your best ally. That’s because the sooner you contribute to your RRSP in the year, the more you can benefit from tax-deferred growth. Moreover, you can deduct RRSP contributions made within the first 60 days of the current year on your previous year’s tax return, leading to an earlier tax refund. So don’t wait until the last minute to contribute – it could mean potentially missing out on thousands of dollars in the long run.  

Helping you plan well

To learn more about RRSP planning strategies for 2020 and beyond, contact our office today.


1.“Table 11-10-0044-01 Selected characteristics of tax filers with Registered Retirement Savings Plan (RRSP) contributions”, Statistics Canada, 2019.