Myths or realities?

February 2, 2019

Mythes ou réalités?

Photo: Unsplash

This text is part of a special booklet.

RRSP contribution room equal to a tax refund.

FALSE. In fact, the amount invested will be deducted from the taxable income, but some financial factors that can make it so that there is no refund.

The RRSP is a financial product.

FALSE.Rather, it is an account registered with the Canada revenue Agency (CRA). The money paid into an RRSP can be invested in various financial vehicles : savings accounts, savings certificates, guaranteed investments, investments backed by equity indices, securities, etc, It is therefore permissible to diversify its portfolio of RRSP according to the objectives that one aims and risk tolerance. One subscribes to an RRSP through a financial institution such as a bank, a trust company, Caisse populaire or insurance company. It is possible to do it directly online and obtain the assistance of an investment advisor.

The contribution room will accumulate.

TRUE. The years for which income tax returns have been filed and where there has been no contributions are considered, and the rights accrue. It is possible to use its rights of contribution deferred since 1991 to increase the maximum deductible. The deduction is also carried forward indefinitely in the future, which is useful when considering contributions important or where its revenues vary from year to year. The amount of money it is possible to contribute to his RRSP usually listed on the federal notice of assessment received in the course of the year.

You need to be 18 years old to contribute to an RRSP.

FALSE. There are no real minimum age. If a person has a qualifying income and a social insurance number, it can contribute to an RRSP.

It is possible to pay more than the limit allowed.

TRUE. The excess contribution maximum can go up to $ 2000 during his lifetime, without penalty. In case of exceeding the maximum allowable, an individual will have to pay 1 % per month on the excess, and this, until it is withdrawn from the RRSP.

We can contribute to the RRSP of his spouse.

TRUE.The CRA authorizes it. This measure can be used in many situations and tax planning to minimize tax payable at the end of the year for both spouses. This can also help maximize the tax refund when one of the spouses has a marginal tax rate higher than the other.

It is best to wait until “RRSP season” to make contributions.

FALSE. In January and February, the taxpayer enjoys a period of 60 days during which it may contribute for the previous year, the period which ends around the 1st of march. However, the fact to contribute on a regular basis allows you to take advantage of the yield obtained during the whole year. Since the amounts in question are less important, they also become easier to manage. Moreover, the more we start early to contribute in his life, the more it is advantageous.

The accumulated savings is available at all times.

TRUE.The amount withdrawn will, however, be taxable according to the marginal tax rate of the taxpayer, in effect for the year in which the withdrawal is made. Therefore, it is essential to make withdrawals when its revenues are low. Some administration fees may also be charged by the financial institution. To compensate for the unforeseen, it is advisable to put aside money in a savings account ordinary.


To know how much to expect to get a refund for his RRSP contributions, a calculation tool online is usually offered by financial institutions. The low-income taxpayers are advised to consult a financial planner in order to obtain his advice in matters of investment. As the retirement income may look like to those who are affected during the active life, the tax rate could remain unchanged and the tax saving is likely to be less marked.

The RRSP was introduced in 1957 by the federal government to allow Canadians to build a supplemental pension plan to be tax-free throughout their working life. Since its emergence, it has rallied millions of investors. All taxpayers have therefore been able to take advantage of the same tax benefits enjoyed by the participants have already the plans are registered pension (REP) offered by their employer.

1957The liberal government of Louis St-Laurent created the RRSP, at the time called ” retirement pension saved “. The limit of contributions is established at 10% of your income for the year, for a maximum of $2500.

1978 Launch of the fund to a registered retirement income fund (RRIF) in order to avoid individuals from having to liquidate their RRSP in one shot or to use the proceeds to purchase an annuity.

1990 Increased the limit on contributions to 18% of revenues in the previous year ; the maximum amounts to an $ 11 500. The rule on unused contribution room now allows individuals to defer the latter within a period of seven years.

1992 Creation of the home buyers ‘ plan (HBP) to help taxpayers to access the property using the funds from their RRSP.

1999 Introduction of the incentive plan the lifelong learning plan (LLP).

2007 The age at which savers have to convert their RRSP into an annuity goes from 69 to 71 years old.

Sources : Statistics Canada and Wikipedia

10 % minimum Percentage of his salary that should be devoted to savings, according to the majority of the specialists

18 % or 26 230 $ Limit deductible contributions to an RRSP of the annual gross income for 2018 (based on the lesser of the two amounts)

2740 $ median Contribution to an RRSP in Quebec in 2016, compared to $ 2500 in 2006

46 years average Age of the contributor québec in 2006, when he was 44 years old in 2006

Source : Statistics Canada

Sources : Submissions, Investment and Retirement Quebec


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