RRSP Insurance

RRSPs offer tax-deferred savings. This means you won’t have to pay tax on your investments and any income earned on those investments until you start withdrawing funds.

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RRSP Insurance
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What is an RRSP?

An RRSP is a registered investment that lets you save for your retirement by deferring taxes on your investment earnings. This means more of your money can stay invested and grow faster.

An RRSP also helps you lower your tax bill today, by allowing you to deduct RRSP contributions from your taxable income. By the time you retire you will likely be in a lower tax bracket, so withdrawals are taxed at a lower rate than today.

How does an RRSP Work?

Any contributions into your RRSP can help you decrease your current taxable income. This means you won’t have to pay taxes on your contributions or any investment growth until you withdraw funds.

For most Canadians, withdrawing from your RRSP at a later point in life – in your 60s or 70s – means paying much less tax. Think of it this way: you’ll probably be in a much lower tax bracket when you’re retired in your 60s or 70s. So, you’ll be paying less tax when you withdraw from your RRSP at that age, all the while helping to lower your current tax bill.

Life Advice Insurance Inc
Life Advice Insurance Inc

Benefits why nearly half of Canadians invest in an RRSP

Use an RRSP to save for retirement while also saving for anything in a TFSA Contributions reduce your annual income, lowering your tax bill

You don’t pay tax on the growth of your investments in your RRSP until you withdraw it so you can keep more of your money.

You can borrow money from your RRSP to go to school or buy your first home without penalty, provided it is repaid within the required time You can make up for missed contribution room from previous years

Think of it this way: you’ll probably be in a much lower tax bracket when you’re retired in your 60s or 70s. So, you’ll be paying less tax when you withdraw from your RRSP at that age, all the while helping to lower your current tax bill.

Plus, you can hold a variety of investments in your RRSP, like:

? Stocks
? Bonds
?️ Segregated Funds
? GICs
? Mutual Funds

? What is your RRSP Contribution Limit?

Your Registered Retirement Savings Plan (RRSP) contribution limit is the maximum amount you can contribute each year. The Canada Revenue Agency (CRA) calculates this limit based on your previous year’s income, pension details, and unused room.

1
Total of your unused deduction room from the previous year.
If you didn’t use your full contribution limit last year, it carries forward.
2
Add the smaller of the two amounts below:
  • 18% of your earned income reported on last year's tax return
  • The annual maximum limit (e.g. $27,830 for 2021)
The CRA uses whichever amount is lower to ensure fairness across income levels.
3
Subtract any pension adjustment from the previous year (if applicable).
This adjustment accounts for benefits you’ve earned through a workplace pension plan.
?
Tip: You can find your exact RRSP contribution limit in your CRA My Account under “RRSP and TFSA” details.
Life Advice Insurance Inc
Life Advice Insurance Inc

What happens if you go over your RRSP limit?

If you exceed your RRSP contribution limit, the Canada Revenue Agency (CRA) may apply penalties and interest.

• You’ll be taxed 1% per month on any amount more than $2,000 above your limit.

• If you don’t pay within 90 days after the calendar year, you may face late-filing penalties and interest charges.

What are the RRSP contribution rules?

1

You can contribute until December 31 of the year you turn 71 years old.

2

You can contribute only what is available in your CRA contribution room.

? Tip: Regularly check your CRA My Account to track your contribution room and avoid penalties.

Frequently Asked Question (FAQ)

It depends how old you are when you retire. You must move your money out of your RRSP by December 31 of the year you turn 71. After that, you can convert your savings to another registered account like a registered retirement income fund (RRIF), purchase an annuity, or withdraw your funds. 
Depending on how your registered accounts are set up, they may be treated differently when you die.In general, at the time of death, the owner of the RRSP is deemed to have cashed out their RRSP assets.However, let s say you ve named your spouse as the beneficiary of your RRSP. In this case, your RRSP can be rolled over to your spouse after your death. This roll-over would be tax-deferred, meaning your spouse won t have to pay taxes until they withdraw funds. Keep in mind that your spouse does not require additional RRSP contribution room when the rollover happens. Talk to a Sun Life advisor to learn more.
Your child will receive the full value of your RRSP funds. But the entire value of the RRSP will also be included as taxable income in the final tax return that will be filed when you die. Please note that generally, your estate is responsible for the associated tax liability. Speak to a lawyer or tax professional to better plan for your situation
There is no way to transfer your RRSP account to someone else. You also can’t transfer money from your RRSP to someone else’s RRSP.