2013 RRSP Contribution Limit
The 2013 RRSP contribution limit is the lesser of 18% of earned income for 2012 to a maximum of $23,820. There are several adjustments that may apply to your personal situation. Here is a simple example. Jane Doe has earned income of $50,000 for 2012. Her RRSP deduction limit is calculated by taking $50,000 and multiplying by 18% which equals $9,000.
The easiest way to check your limit is to look at your Canada Revenue Agency (CRA) Notice of Assessment.
You typically receive this sometime in May after filing your income tax return.
I have attached a sample of the CRA Notice of Assessment T451 for reference and placed a large green arrow pointing at the spot near the bottom of the page. It also has a large *(A) beside the value.
For more information on RRSP, visit the CRA site.
Probably the comment I hear most often from prospective clients, is that RRSP withdrawals are taxable when withdrawn. It seems to catch them off guard and I’ve actually heard them say that if they would have known, they never would have started an RRSP. So remember, an RRSP is simply a tax deferral method. You received a tax credit (tax refund) when you put money in the RRSP each year. The basic methodology for RRSPs is to contribute in years of high income earnings since your marginal tax rate (tax rate on the last dollar earned) is highest and then withdraw at a lower rate which is typically during retirement.
Don’t be dismayed if you can’t make the maximum contribution limit every year as it carries forward to the following year, so it’s not a use it or lose it tax planning method. The simplest method to contribute to an RRSP is to “dollar cost average (DCA)”. It’s simply an easier way, in my opinion) than making a lump sum at the end of February each year.
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