FAQ – Savings and investment – RRSPs
Yes, AccèsD makes it easy to contribute to your RRSP. Log in.
Yes. The year you turn 71 is the last year you can contribute to your RRSP. During the year, you will need to withdraw the funds from your RRSP, transfer them to a registered retirement income fund (RRIF) or use them to purchase an annuity.
No, because the most important part of compound interest is time.
Starting to invest when you’re young is definitely the way to go, even if you start small. Automatic transfers are a great way to get a head start.
Saving regularly in small amounts is easier on your budget. The great thing about automatic transfers is that you choose how much and how often you want to contribute, whatever works best for you. Your contributions are automatically deducted from your account and invested in your RRSP.
The sooner the better. You can start contributing to an RRSP the year you start earning contribution room (i.e., the year after you start earning an income). And after you turn 19, you get $2,000 of wiggle room for overcontributions. Time is money: the earlier you start contributing, the bigger your RRSP will be.
It all depends on your retirement plans. To maintain your lifestyle in retirement, the general rule of thumb is that you’ll need about 70% of the income you earn in the years leading up to your retirement. Most people become eligible for retirement income from CPP/QPP or a private pension plan around age 60, but it’s usually not enough. You’ll still need savings (ideally in an RRSP) to maintain your lifestyle.
The compounding effect on your interest means the more you save, the more you earn. Each dollar you’re able to contribute to your RRSP increases the capital on which the interest is calculated. So if you have extra money or if you’re in a better financial position, it’s a good idea to increase your RRSP contributions. Even putting an extra $5 a week into your RRSP will ultimately make a difference.
If you don’t have enough cash on hand to make an RRSP contribution, you might want to consider taking out a short-term loan. It’s one way to increase your RRSP contribution and get a tax break.
You can use those tax savings to pay down the loan, reducing your interest charges and the number of payments you’ll have to make.
If you don’t want to take out a loan, an easy way to fit savings into your budget is to set up automatic transfers. You can even do it yourself from AccèsD. Once your contributions are automatic, you won’t need to think about them!
Yes. If you earn BONUSDOLLARS® on your Desjardins credit card, you can use them to contribute to your RRSP.
Anyone under age 71 who earns income and files a tax return in Canada can open an RRSP and make contributions.
There is a $2,000 grace amount for overcontributions, but the excess amount cannot be deducted from your taxable income. A penalty tax of 1% per month applies on contributions over the $2,000. The penalty is assessed monthly as long as the excess amount is still in your RRSP.
| RRSP | TFSA | |
|---|---|---|
| Contributions are deductible from your taxable income | Yes | No |
| Withdrawals are taxed | Yes | No |
| Investment income becomes taxable when withdrawn | Yes | No |
| Taxation at death | Yes Unless your RRSP is transferred to your spouse or to a dependent child or grandchild. |
No After your death, your spouse can transfer the funds in your TFSA into their own. This will not affect their contribution room. |
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