How RRSP contributions can benefit you


During this time of year, RRSP contributions are on everyone’s mind. The deadline to make a contribution for the 2021 tax year is March 1st. RRSPs are one of the three major tax shelters available in Canada. Here’s how RRSP contributions can benefit you.

You’re Saving for your Retirement

Unless you’re planning on working forever, you’re going to need a way to fund your retirement. Money put into your RRSP is generally not touched until retirement (unless you take advantage of certain programs such as the Home Buyer’s Plan), so you’re contributing to your nest egg every time you make an RRSP contribution. Starting early and making regular contributions can have a significant impact on your retirement lifestyle, because the earlier you start, the longer your money has to grow.

If you haven’t started saving for retirement yet there’s no time like the present. Remember, when it comes to retirement the best time to plant a tree was yesterday but the next best time is today. Cambrian’s financial advisors have years of experience and will work with you to design a retirement plan to meet your needs both now and in the future.

You can Take Advantage of the Home Buyers’ Plan

Are you looking to become a first-time homeowner in the near future? You can withdraw up to $35,000 from your RRSP to purchase a home. Keep in mind that you will need to re-pay these funds: you must begin to do so the second year after the year in which you withdrew the funds. You have 15 years to re-pay the funds withdrawn, though if you choose to do so, you can re-pay the balance in full earlier. It is important to re-pay at least the minimum amount each calendar year, because if you do not, it will be added to your taxes as RRSP income, and you will lose that contribution room.

You can Take Advantage of the Lifelong Learning Program

You can withdraw up to $10,000 tax-free per calendar year for a maximum of $20,000 to put towards full-time education for yourself or your spouse if you meet CRA's eligibility requirements. Just like the Home Buyer’s Plan, funds withdrawn from your RRSP for the Lifelong Learning Program need to be repaid over a period of 10 years.

You are Protected from Creditors

RRSPs are covered under the Canadian Bankruptcy and Insolvency Act. They therefore can not be used to cover liabilities like lawsuits or bankruptcy. However, there are some exceptions to this law. Contributions made within 12 months before the date of bankruptcy are excluded from this protection. 

You’ll Save on your Taxes – Twice!

An RRSP is what’s known as a tax-deferred investment. Any contributions you make today are deducted from the income you claim on your taxes, reducing the amount you owe. Making regular contributions during your peak earning years will help keep your tax bill to a minimum while you’re in the workforce.

The reason for this is that when you withdraw funds from an RRSP, they are taxed as income. Since you’ll no longer be earning a salary in retirement you are likely to be in a lower tax bracket when you need the funds in your RRSP, reducing the amount of tax you pay on your retirement income.

It’s important not to think of your tax refund as “free money”, but rather as an opportunity to invest into your RRSP, your TFSA or to pay down some debt.


Check out Cambrian’s Retirement Assessment Calculator to see if you’re on track to meeting your retirement needs.