RRSP Contribution Deadline: How To Plan Ahead

Many of us are familiar with this story. We look at our calendars near the end of February and realize we haven’t put a penny into our RRSPs. Or perhaps we think we have time to put more in before the due date only to realize the deadline is looming. When it comes to the RRSP contribution deadline, it pays to plan ahead.

Ask any financial planner and they’ll tell you about people running cheques over at the last possible second to get in their contribution before the deadline. Don’t leave it to the last minute!

Take full advantage of your RRSP. With proper planning and an understanding of what you can and can’t contribute, and when, you can reap the rewards in retirement.

It’s helpful to talk to a financial advisor to make sure you never miss a payment. In addition, there are a few simple tips to help you stay ahead of the deadline. For one, set up regular contributions with automatic deductions through pre-authorized payments from your bank account. Secondly, deposit any tax refunds directly back into your RRSP so that money continues to work for you.

When is the RRSP Contribution Deadline?

You can make RRSP contributions into the next calendar year up to 60 days, or up until February 29. This year, the deadline is February 29, 2024. Contributions made before February 29 can be put towards your 2023 tax return.

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Can I Contribute to an RRSP After the Deadline?

You can contribute to your RRSP at any point in time, so long as you don’t exceed the RRSP contribution limit. However, you must make a contribution before February 29, 2024 if you want it to count towards your 2023 taxes. If you miss this deadline, it will be put towards your 2024 taxes instead.

Related Reading: How To Fix RRSP Over-Contributions

What Happens If I Miss the RRSP Deadline?

If you miss the deadline, your contributions count towards the following tax year. So, make sure to plan ahead if you want to hit the RRSP contribution deadline for the current tax year. There are two important things to note:

Home Buyers Plan Repayment

If you owe money on your HBP repayment, plan to contribute at least the required minimum, and by the RRSP contribution deadline. Otherwise, any unpaid funds add to your income and are taxed accordingly.

RRSP Contribution Room

Any unused RRSP contribution room transfers to your allowable contributions for the following tax year. So, if you miss out on contributing the maximum allowable amount by this year’s RRSP deadline, you can benefit similarly in the next tax year. All is not lost. Use a contribution calculator to confirm whether you are setting aside enough money each year. Plan ahead accordingly for your future RRSP contributions.  

RRSP Tax Deduction

Contributing to your RRSP is beneficial because you can reduce your taxable income through the RRSP tax deduction. If you miss the deadline, you will miss out on the taxable income reduction. However, if you make a contribution after the RRSP contribution deadline, you can still claim the RRSP tax deduction next year.

Should I Borrow to Invest in an RRSP?

This is a commonly asked question. It depends on the individual. For the average person, borrowing money to invest in an RRSP isn’t recommended. The reason is simple – you take on debt you may never be able to pay back. You may have good intentions, but if you use money you don’t currently have to save money for the future, and then you need money, where is it going to come from? Chances are either from the existing loan you’re trying to pay back, or from the RRSP you just put all of your money into.

Many people do this. And perhaps you are a very disciplined investor and saver, and you have confidence you can pay it back. If that is you, by all means, test it out one year and see if you can successfully borrow to save. But, generally speaking, draw from your income, not your debt, to contribute to your RRSP.

How Much RRSP Should I Contribute to Avoid Paying Taxes?

As much as you can! If possible, contribute up to 20 percent of your income to your retirement savings. The more you contribute, the more you save, the lower your taxable income. And the lower your current tax hit on your income. Use a tax calculator to understand the true impact of taxes on your contributions. Plan ahead so you aren’t scrambling before the RRSP contribution deadline.

How Long Can You Carry Forward RRSP Contributions?

One of the best features of an RRSP is that any unused contribution room carries over to the next tax year and indefinitely. Fill that allowance to the max every year, until you reach it. Age is the only exception to this rule. You can carry contribution room forward year-over-year, until you hit the age maximum of 71 years old.

How Much Should You Contribute to an RRSP Based on Income?

Your RRSP contribution limit depends on your income. For the 2023 tax year, the limit is 18 percent of your earned income, or $30,780, whichever is lower. The exception to this is if you have unused contribution room from previous years.  That allowance rolls over to the current tax year and the next, until you max it out.

Spousal RRSP

Married and common-law couples can opt to contribute to their spouse’s RRSP. Doing so decreases their taxable income and benefits them at tax time. However, the contribution deducts from your RRSP allowance, not your spouse’s. And if you max out your own contributions, you cannot contribute to your spouse’s RRSP. A financial advisor can help guide you if you aren’t sure whether a spousal RRSP is beneficial in your situation. Again, a little bit of planning can go a long way as you prepare for the RRSP contribution deadline.

Are RRSPs Really Worth It?

Investing in an RRSP is advantageous because your investment grows tax-free. And while withdrawals are subject to taxes, it’s at a much lower rate in retirement. The money you lose to taxes after your working life is much less than if you withdraw it while making a higher income.

Is There A Maximum Contribution Limit?

The maximum RRSP contribution limit changes annually. It depends on current government regulations, and your previous year’s earnings and contributions. For the 2023 tax year, your RRSP contribution is 18 percent of the income you reported on your 2022 tax return, up to a maximum of $30,780.

How Do You Find Out Your Own Contribution Limit?

There are a number of ways to hunt down exactly how much money you can contribute to your RRSP in a specific year. Make sure to check before the February 29 deadline.

To help you plan ahead for your RRSP contribution, you can find your own personal contribution and deduction limit:

  • On your previous year’s Notice of Assessment
  • By logging into your CRA My Account
  • By calling the CRA’s Tax Information Phone Service (TIPS)
  • On Form T1028, which you will receive in the event that your RRSP deduction limit has changed since your last assessment

Related Reading: RRSP Withdrawal Rules: What to Know

Who Is Eligible For An RRSP?

There is no minimum age at which someone can begin investing in RRSPs. You can contribute as long as you have an employment income of some sort and file a tax return. Although, some financial institutions require you be the age of majority in your province or territory to open a RRSP. If that’s you, start to plan ahead for the February 29, 2024 RRSP contribution deadline.

While there is no age minimum, RRSPs close when you turn 71. You can continue to contribute annually, and earnings throughout the year are tax-sheltered. However, at the end of each calendar year, you close the account and the money is either invested elsewhere, converted into another account or used as income.

It’s important to do all you can to maximize your RRSP contributions and benefit at tax time. A financial advisor can help to keep more money in your pocket by reviewing your needs and goals, income and debt, and life situation. In addition, they can help make sure you plan ahead so you don’t miss the RRSP contribution deadline.

Read More: TFSA vs RRSP: Where to Put Your Money

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