Should you put money towards your RRSP?

If you’ve been living under a rock lately and haven’t realized, tax season has started or is right around the corner for many. This means you have been receiving or about to get your T4 slip(s) or other slips. Here’s a checklist of the things you will need for your Taxes Checklist.

With that being said there are a couple of tax deadlines and facts about RRSP that you should know before you make a decision.

Deadlines for Taxes based on taxes.ca

February 2017

Starting February 2017, you’re able to get a printed copy of the 2016 General income tax and benefit mailed to you by calling CRA (1-800-959-2221). Between February and early May 2017, the General guide and forms book for your province or territory are available from any postal outlet or Service Canada office near you.

February 20.2017

The first day of using NETFILE to electronically file your 2016 CRA tax return.  For TELEFILE, call 1800-959-1110. Netfile is available from February 2017 until January 20, 2018, for the electronic filing for 2016 personal income tax and benefit return.

March 1, 2017

RRSP DEADLINE!!! 2017 RRSP deadline for contributing to your Registered Retirement Savings Plan (RRSP) for the 2016 tax filing year

March 15.2017

Quarterly instalment due if you pay taxes to CRA by instalments.

April 30, 2017

Tax Deadline for generally most individuals for personal income tax filing of 2016 tax year.

Payment to CRA of your balance owing for 2016 personal income tax is generally due April 30, 2017, for all personal income tax filers including self-employed.

June 15, 2017

CRA tax deadline for self-employed persons to file their personal income tax return. Any balance owing must be paid by April 30, 2017

To the individuals that aren’t familiar about RRSP here are some facts based on equitable.ca and retirehappy.ca

What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is a savings account that has unique tax-deferral characteristics that make it a great choice for retirement savings. The tax structure allows you to defer paying income tax on your RRSP deposits and earnings until the money is withdrawn. Since many people have a higher tax rate during their working years than during their retirement years, this often results in overall tax savings.

Who is eligible for RRSP?

Anyone who has earned income, has a social insurance number (SIN) and has filed a tax return can contribute to an RRSP up until December 31 of the year they turn 71.

Maximum contribution limits

Your allowable RRSP contribution for the current year is the lower of:

• 18% of your earned income from the previous year, or
• The maximum annual contribution limit ($26,010 for 2016 and $25,370 for 2015) for the taxation year less
• Any company-sponsored pension plan contributions (PA- pension adjustment)

Now that you know a bit about RRSPs, let’s go back to the deadline I want to discuss…

March 1, 2017, RRSP Deadline! That’s in a couple of days!! The question is if you should you put money towards your RRSP? Well, I would say yes and no.

Reasons why you should consider putting money into your RRSP…

• The main reason is to prepare for your retirement. If you wish to save for your future. Then you may want to consider putting money into your RRSP. Let’s be real, it’s wise to save for your future, why not go with something that will benefit you and is highly recommended.
• RRSP is a tax deduction. Why is that important? Any amount of that goes into your RRSP reduces your taxable income. This means you have a better chance of getting a tax refund or not owing back as much. So this is a strategy you would want to think about if you’re making an income that resorts in owing ($35,000 +)depending on your marital status.
• Your company is offering a pension plan. If your employer is willing to contribute to your pension plan. Then why not do it? The best idea is to match the amount that they have already contributed. Just make sure it doesn’t go $2,000 over your overall limit or you’ll be paying back.

Reasons why you don’t have to put money into your RRSP YET…

• You probably don’t have the time to put in the money. There are literally two more days for you to put the money in. There’s a high chance you won’t be able to put it in. But no worries, you have unused contribution room that can be carried forward and be used in the future years.
• For individuals that have lower income. Because RRSP is more suitable for higher-income earners. It won’t make much of a difference at the moment if you put money towards your RRSP. Especially if your income is $30,000 or less., try waiting until your income increases
• You rather use your TFSA. Yes, I’m aware TFSA isn’t a tax-deferral, but you also don’t get taxed on the withdrawals from the TFSA like the RRSP. Ideally, the only times you can touch your RRSP without being taxed is when you’re putting a down payment on your first new home (Home Buyers’ Plan) or if you’re going back to school (Lifelong Learning Plan). But even those have rules and regulations to read about.

So what am I going to do on March 1, 2017?

I procrastinated enough to know that I won’t be putting any money towards my RRSP for the year 2016. However, I do plan on buckling down this year and start thinking of a certain amount to put into my RRSP (Perhaps 10-15% of my income). I’m also thinking of the right approach for my RRSP to grow in the future. Overall, you should consider putting money into your RRSP as it’s a way to save for your retirement. If you’re not able to do it this year, then make plans for this year or in the near future.

So what are your views on RRSP? Are you all prepared for March 1^st or still frantic? I would love to hear your comments or stories. Thank you for tuning in.