March 1, 2022 is the last day to contribute to your RRSP and lower your taxes for the 2021 tax year.
Contributing to a Registered Retirement Savings Plan, more commonly referred to as RRSP, has numerous financial benefits. Youou can reduce your taxable income, pay less tax now, and potentially build a larger retirement fund. Any investment income earned in an RRSP is tax-deferred, until withdrawn.
Benefits of Employer-Sponsored Retirement Plans
Before googling “where can I buy an RRSP?”, ask your employer about their retirement plan. Many employers offer their employees the opportunity to contribute to a Group RRSP. Even if your employer does not match your contributions, it can be advantageous for you to join the plan:
- You benefit from immediate tax relief (save money on income taxes every paycheck instead of waiting until tax season). Who would say no to money in their pockets sooner rather than later?
- Chose from a variety of funds for every type of investor. If you don’t feel confident building and monitoring your own portfolio, don’t worry, you can invest in a portfolio fund. This means you can either be very involved in managing your money or take a step back and let the fund managers work their magic.
- You generally benefit from lower fund management fees than you would as an individual at a bank or other financial institution. The compound effect of even 1% fee savings over a lifetime can be significant.
Maximum Contribution
If you are already contributing through payroll deductions but would like to make an additional contribution to maximize your tax credit for 2021- just be sure not to overcontribute for the year. Your RRSP contribution limit is 18% of your previous year’s income up to a maximum of $27,830. Since other factors can have an impact, we recommend that you verify your contribution limit on your most recent Notice of Assessment (NOA). The NOA is sent to you by the Canada Revenue Agency after you file your taxes each year. You can also call the CRA at 1-800-267-6999 or login to CRA My Account.
