RSPs

RSP Contribution Limits^*

For your convenience, we have compiled a list of guidelines to help you plan your RSP contributions.

How to calculate your maximum RSP contribution for the current year

The Notice of Assessment that you received after filing last year's tax return stated your current year's maximum RSP contribution amount. If you have not received this notice or need to double check the amount, simply call Canada Revenue Agency (CRA). For service in English, call 1-800-959-8281. For French, call 1-800-959-7383.

If you are/were self-employed, or employed and not a member of an employer-funded Registered Pension Plan (RPP) or Deferred Profit-Sharing Plan (DPSP):

your current year's RSP contribution limit is 18% of your previous year's "Earned Income" to a maximum of $21,000 (2009) plus any unused contributions carried forward from previous years.

If you are/were a member of an employer-funded RPP or DPSP:

your current year's RSP contribution limit is 18% of your previous year's earned income to a maximum of $21,000 (2009) minus the Pension Adjustment reported by your employer (found in box 52 of your previous year's T4 slip), plus any Pension Adjustment Reversal reported by your employer on Form T10, and any unused contribution carried forward from previous years.

Carry-forward

If you don't contribute the maximum allowable to your RSP in any year, you can carry the unused portion forward indefinitely. Any amounts "carried forward" should be reflected in the statement provided by CRA with your "Notice of Assessment".

$2,000 lifetime over-contribution limit

If after receiving your statement from CRA, you find that you've made contributions in excess of your contribution limit, there is a "safety net". Over-contributions can remain in your plan without penalty as long as the excess balance is $2,000 or less. (If your over-contribution exceeds $2,000, you may be assessed a penalty of 1% per month on the excess amount.) While you won't get a tax deduction for any over-contribution in the year it is made, you can claim it as part of your contribution limit in subsequent years.

Lump-sum transfers

Lump-sum transfers to an RSP from another RSP are permitted if funds are transferred directly between plans. In addition, a Retiring Allowance may be transferred directly to an RSP without an income tax deduction at source for years of service up to and including the previous tax year. This information is provided as a guide only. For detailed information on exact limits for Retiring Allowance transfers, please contact your CRA District Taxation Office or your tax advisor. CRA also publishes a Supplementary Pension and RSP Tax Guide.

Withdrawals from your RSP

Although an RSP offers the potential for long-term tax deferral, you may withdraw all or part of it on request (subject to the terms of the investments you choose). Of course, any money you withdraw is considered taxable income in the year it is withdrawn. But the important part is that your money is available if you need it. Withholding taxes apply on funds withdrawn from an RSP except when funds are transferred from one RSP to another directly, or when funds are transferred to a retirement income option such as a Retirement Income Fund (RIF).

Note: Additional taxes may be payable when you file your tax return, depending on your marginal tax rate.

Your savings are ready when you retire

You can accumulate retirement savings in your RSP up to December 31st of the year you turn 71, at which time it must either be converted into an approved form of retirement income such as a Retirement Income Fund (RIF) or Annuity, or withdrawn in cash. If you withdraw cash, you must pay income tax on the amount in the year it is withdrawn. If you wish to avoid this, it's important to arrange for the purchase of a RIF or an Annuity with your RSP funds prior to December 31st of the year you turn 71. Consult a financial advisor ahead of time as the retirement income option you choose should be based on your individual needs.