RRSP Contribution Limit calculator

RRSP contribution limit quick facts:

• An RRSP (Registered Retirement Savings Plan) is a registered account where you, your spouse, or common law partner can make regular contributions towards your retirement. You can deduct RRSP contributions against your income at tax time, reducing your taxable income and potentially resulting in a larger tax refund. 
• Any unused RRSP contribution room will carry over to the next year.

  • If you’re unsure how much RRSP contribution room you have (or if you have any at all), you can look it up easily through the CRA website or consult your most recent tax forms. 

    You can also look at your RRSP deduction limit from the previous year and subtract from that the contribution you made this year to arrive at your contribution room. For example, if your RRSP deduction limit at the start of 2023 was $30,000, and you contributed $5,000 this year, your total contribution room would be $25,000.

• The RRSP limit for 2024 is 18% of your earned income for the previous year up to a maximum of $31,560 (whichever is lower).
• The deadline to make an RRSP contribution eligible for a tax deduction for the previous year is 60 calendar days into the new year.
• You can find your RRSP contribution limit using the calculator above or by logging into CRA.com.
• Overcontributing to your RRSP can have consequences in the form of fines equal to 1% of the over-contribution amount per month, above your $2,000 over contribution lifetime limit. 

What happens to unused contribution room?

Any contributions from previous years that haven’t been maxed out can be used in the present, so if you’ve historically contributed less than your limit, you can add those leftover funds onto whatever you’re contributing in the future.

RRSP contribution room - examples 

Let's say you make $82,000 per year and want to contribute your maximum allowable amount (18% of your income) to your RRSP. Providing you don’t have any leftover contribution room, your limit would be $14,760. When you’re ready to file your income tax, the CRA will consider your yearly income to be $67,240, meaning that difference of $14,760 is tax-deferred. This doesn’t mean it’s tax-free - you’ll eventually have to pay taxes on it once you retire and withdraw money from your RRSP to live off of, but by that point you’ll likely be in a lower tax bracket and won’t have to pay as much as you would now.

You make $82,000 and want to contribute the maximum of 18% ($14,760) this year. The previous year, however, you chose to only contribute 10% of your income ($8,200). Because you didn’t max out your contribution from last year, you’ve still got an additional $6,560 to use this year, on top of the $14,760 you’re already contributing, meaning you’re allowed to contribute $21,320.

Pension adjustment

For employees participating in Registered Pension Plans (RPPs) or Deferred Profit Sharing Plan (DPSP), a pension adjustment (PA) refers to the amount of pension credits you have accumulated over a year with a specific employer. Because contributions to your RPP or DPSP are also for retirement, this can reduce the amount you can contribute to your RRSP in the year following. Past service pension adjustments (PSPAs) can also hinder your allowable RRSP contributions, as these represent improvements to the value of your pension plan based on past service events such as retroactive benefits or an additional period of past service that has been credited.

When you stop being part of your RPP or DPSP, a pension adjustment reversal (PAR) will be added to your RRSP. This represents the total amount of excess PAs and PSPAs after the member has been paid his total benefits from the plan.

How to find your unused RRSP contribution room?

If you’re unsure how much RRSP contribution room you have (or if you have any at all), you can look it up easily through the CRA website or consult your most recent tax forms. 

You can also look at your RRSP deduction limit from the previous year and subtract from that the contribution you made this year to arrive at your contribution room. For example, if your RRSP deduction limit at the start of 2022 was $40,000, and you contributed $5000 this year, your total contribution room would be $35,000.

Unused RRSP contribution room vs. unused RRSP contributions 

There is a slight difference between unused contribution room and unused contributions (a.k.a deductions). Unused contributions are amounts you contributed to your RRSP in the past but haven’t yet claimed on your taxes. They can be found on the CRA website on your notice of assessment under “unused RRSP contributions previously reported and available to deduct for year.” Be sure to account for these in your income tax calculations and when determining your contribution room.

What happens if you over-contribute to your RRSP?

In the event that you over-contribute, you’ll likely get off easy - providing your contribution doesn’t go over the limit by too much.

In cases of over-contribution by $2,000 or less, the CRA won’t penalize you, but those extra funds won’t be tax-deductible. If you over-contribute by more than $2,000 (even if it’s just a few dollars), you’ll receive a warning letter from the government advising you to get rid of the offending amount. If you fail to do this, you’ll be penalized 1% of the extra money each month you allow it to stay in the account. And, if you fail to pay those penalties on time, you’ll also get hit with much-higher late fees, compounding what you owe. 

In the case of an innocent mistake, however, you can always apply to have the penalties waived.

Setting up an RRSP

Most employers offer what’s called a Group RRSP. These are funded by deductions from you and your co-workers’ paycheques, similar to how a 401K works in the United States. In some cases, your employer may even match a percentage of your contributions (typically 1-5% of your salary). In this case, it’s wise to contribute enough to force your employer to pay the maximum, as you’ll essentially be getting a free boost of funds. If your workplace doesn’t currently offer this (or if you’d like a separate RRSP in addition to the one offered by your employer), you can always set up an RRSP on your own with your chosen financial institution. Typically, there are four options you can choose from:

1. Individual RRSP 

With a personal RRSP, the account belongs to the contributor and tax deductions are available only to the contributor. You can hold a variety of investment types in your individual RRSP, like stocks, bonds, guaranteed investment certificates (GICs), and mutual funds, but you can’t hand pick the mix yourself unless you choose a self-directed RRSP account. 

2. Group RRSP 

With a group RRSP, your employer offers RRSPs which contribute from your payroll automatically. From there, it works the same as an individual RRSP, and you can select the type of investments you want based on the plan. You can usually choose whether you participate in this plan. If contributions are mandatory, however, you won’t be subject to the excess contribution tax. If your employer offers RRSP matching, this is considered a taxable benefit, but because RRSP contributions offer a tax deduction, this will help to offset the taxable benefit.

3. Spouse or common-law partner RRSP

Spouse or common-law partner RRSPs are perfect for couples who want to split their retirement income equally, especially if one partner earns a higher annual income than the other. In a case such as this, the higher-earning partner will contribute for both parties and receive a tax deduction, while their counterpart will be able to equally share in the retirement income down the road. 

4. Self-directed RRSP 

With a self-directed RRSP, you can choose the specific investments you want in your account yourself. You may have to pay trading fees. This is ideal for those with investment experience and who are interested in investing in more types of securities besides term deposits and savings.

Approved investments for RRSPs

RRSPs allow for a wide variety of investments and assets. These include:

• Equities: This can take the form of a large basket of stocks in a mutual fund, index fund, exchange-traded fund (ETF), or even individual stocks if you have the knowledge and ability to pick them.
• Guaranteed investment certificates (GICs): If you’re very risk-averse, you might want to consider this deposit product. They pay a fixed interest rate and are almost always insured by the government.
• Bonds: Part of the fixed-income family of investments, bonds are loans to companies or governments. Depending on the financial health of the entity borrowing the money, they can pay either high or low rates of interest. As a general rule, the higher the interest rate on the bond (vs. other borrowers), the riskier it is. There are also bond ETFs and mutual/index funds.
• Mutual funds
• Savings accounts
• Mortgage loans
• Income trusts
• Foreign currency
• Labour-sponsored funds

What happens to an RRSP once you retire?

When you turn 71, your RRSP must either be liquidated (withdrawn), turned into a Registered Retirement Income Fund (RRIF) or used to purchase an annuity. An RRIF is similar to an RRSP in that it’s an account that holds a mixture of investments or cash, but the difference is it will provide you with regular monthly payments based on the level of funds in your RRIF. These payments are taxed according to your marginal tax rate. 

For example, if you’re 71 years old and have $600,000 of retirement savings, your RRIF will pay out $2,640 per month. If this is your only source of income, you’ll be taxed at a marginal rate of 12%, leaving you with $2,323.20 per month.

An annuity, on the other hand, provides you with guaranteed payments over your lifetime based on the funds you transferred from your RRSP and/or other accounts. You purchase an annuity and can set the schedule of payments yourself. 

RRSPs vs. TFSAs

While both RRSPs and TFSAs can function as retirement savings funds, which one you should choose largely depends on your current financial circumstances and plans for the future.

Because RRSP contributions are tax-deductible but its withdrawals are taxable, they’re better suited towards someone currently making a high income who expects to be living off less once they retire. A person like this can use their current RRSP contributions to reduce their taxes each year, then pay less tax on their RRSP income once they’re retired and in a lower tax bracket. While their RRSP may not have a lot of flexibility due to its taxable withdrawals, it’s most likely not a concern as they won’t need access to the money as it grows.

TFSAs, on the other hand, are the opposite. Withdrawals from a TFSA are tax-free, and contributions are not tax deductible. In this way, TFSAs are perfect for those in a lower tax bracket who expect to be making more money as they get older (i.e. small business owners or entrepreneurs). TFSAs also have the added benefit of liquidity, meaning you can withdraw money from the account at any time as needed (check your TFSA limit here).

That being said, there’s no rule against having both, and a TFSA can make an excellent counterpart to an RRSP if you’ve got the ability to regularly contribute to each. 

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