February 2023 – March 1st 2023 is the deadline for making an RRSP contribution for the 2022 tax year. Besides saving tax when you file your personal tax return, this is a great opportunity to take advantage of lower market prices and increase your future retirement lifestyle. Some considerations may include:
-The 2022 maximum RSP contribution limit is $29,210. If you’re unsure how much you can contribute, your 2021 Notice of Assessment (from your prior year’s tax return) will give you the exact amount of your 2022 RSP room.
-If you don’t have funds readily available, or you want to catch up on a large carry forward of RSP room so that you can meet your retirement expectations, consider an RSP loan. Interest rates are higher now, so be sure your investment and time horizon make sense.
-You can also transfer funds from your non registered or TFSA account to your RSP, but take care as funds transferred from a non registered account could have tax consequences.
-The 2023 maximum RSP contribution room is $30,780. Investing all or part of this sooner than later for greater long term compounded growth always makes sense.
-Rather than having to come up with a lump sum of cash at year end, instead consider setting up a regular contribution (monthly, bi-weekly, etc.) to average into the market. Unless you receive a year end bonus, or other large payment, this is usually easier on the pocketbook, and also often results in a larger retirement fund over time. If you are contributing regularly throughout the year and have had a pay increase, consider increasing your regular contributions too.
-Instead of waiting for a tax refund, file a T1213 with CRA to get their approval so that your employer does not have to deduct tax at source on the amount you contribute to your RRSP. This can make saving easier and avoids giving the government an interest free loan of your hard-earned tax dollars.
