Is an RSP the same as an RRSP?
- Yes and no.
- An RSP is a Retirement Savings Plan, while RRSPs are Registered Retirement Savings Plans
- An RSP can refer to any account or financial product used to help you save for retirement.
- An RRSP, is, however, a specific account that provides tax deductions and has contribution limits.
- Not all RSPs are RRSPs, but all RRSPs are RSPs - The names are used interchangeably.
How does a spousal RRSP work?
- Contributions to a spousal plan can be made up to, including the year your spouse turns 71, as long as you have previously earned income.
- You can claim the deduction for a spousal RRSP, and the contribution limit is based on your income, not your spouse’s.
- You pay the taxes on withdrawals unless the contributions are held in the plan for at least two years after the end of the year in which the last contribution was made. However, your spouse controls the plan and its assets.?
Can I transfer any or all of my RRSP accounts to my spouse’s RRSP account?
- Registered money cannot be transferred from one spouse to another while both parties are living.
Can I contribute securities?
- Yes.
- Securities are treated as dispositions at fair market value at the time of contribution.
- You can contribute now but carry forward the deduction to a later year.
- Any capital gains are taxable in the year that you dispose of the security.
- Capital losses are deemed to be nil.
Can I swap securities between accounts?
- Swapping between registered and non-registered accounts can be done at the fair market value of the securities swapped.
- It is a good idea to hold interest-earning securities inside your RRSP (for tax-deferred compounding) and growth securities outside (since capital gains will be taxed as ordinary income upon withdrawal from an RRSP).
Is there a foreign content limit?
- The foreign content limit was removed in 2005.
What is a pension adjustment?
- A pension adjustment represents the value of any tax-deductible pension or Deferred Profit Sharing Plan (DPSP) contributions you and/or your employer made in the prior year.
- This adjustment aims to better balance tax-sheltered savings opportunities among those who have good pension plans and those who do not.
- An annuity is a fixed stream of payments.
- You pay a life insurance company or financial institution a lump sum when you buy an annuity. In return, you are paid a set amount periodically for a duration dependent on the type of annuity you have purchased.
What is a Registered Retirement Income Fund (RRIF)?
- RRIFs are the most popular RRSP maturity option because they are quite flexible. They are really RRSPs in reverse because they allow for the continued deferral of taxes. Instead of contributing money every year, a minimum amount is withdrawn.
- Typically, converting an RRSP into an RRIF is the most advantageous option since this allows you to avoid the massive tax burden that a lump sum withdrawal generates.
- A RRIF also allows you to maintain control of the holdings within your registered plan, which means that you can continue buying and selling different investment options as you see fit.
What are Locked-in RSPs (LRSPs) and Locked-in Retirement Accounts (LIRAs)?
- LRSPs and LIRAs are locked-in plans that can be used to transfer pension fund assets once employment with the pension provider is terminated.
What is a Life Income Fund (LIF)?
- LIFs are investment vehicles intended to draw down on assets that have accumulated in a locked-in RSP (LRSP or LIRA).
- Like a RRIF, LIFs have a minimum amount that must be withdrawn every year. However, in contrast to an RRIF, LIFs also have a maximum withdrawal limit per year.
What is a retiring allowance?
- It is a lump-sum payment made by an employer to an individual upon the termination of employment.
- If you leave your job, part or all of your severance payment may qualify as a retiring allowance, even if you are not retiring. That amount can be rolled over into your RRSP on a tax-deferred basis without affecting your normal contribution limit.
I need to redeem money from my RRSP account. What is the minimum withholding tax rate applicable to this transaction??
- Withholding tax rates are based on the gross amount of the withdrawal.
- The following mandatory minimum withholding tax rates?are applicable:*
How can I determine how much I can contribute to my RRSP account?
- The amount you can contribute or "contribution room" is determined by your earned income.
- Your yearly contribution room is based on 18% of?your previous year’s income, less any pension adjustment.
- The 2020 contribution limit is $27,830. The deadline to do so is March 2nd, 2021.
- Keep in mind that unused contribution room can be carried forward indefinitely to future years. CRA will advise you, by notice of assessment, of your contribution room.
For more information,?visit??the CRA website
I over-contributed to my RRSP account, and I am facing penalties from CRA. How can I correct this?
A. To correct this, you can complete a T3012A form and submit it to CRA. Upon approval, you can submit this form to your dealer and withdraw the applicable amount without incurring withholding taxes.
I withdrew funds from my RRSP account for the home buyers program. I am now required to commence repayments. Do I have to repay the RRSP account from which I took the funds, or can I contribute to any one of my RRSP accounts?
Repayments under the homebuyer’s program can be made to any of your RRSP accounts. It does not have to be to the account from which you made withdrawals. You cannot, however, contribute to a spousal account and have it deemed as a repayment.
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