Once again, it’s that time of the year when we all have to start thinking about our finances and income tax returns. It’s also a time when we’re especially interested in our RRSPs, as the contribution deadline approaches. To get you back into RRSP mode, here’s a recap of the main features of this savings vehicle.
The Registered Retirement Savings Plan (RRSP) was created in 1957 to encourage Canadians who do not have an employer pension plan to save for their retirement. The objective is still the same today.
One of the features of the RRSP that is extremely attractive for savers is that contributions may be deducted from taxable income. In other words, if you deposit $10,000 into your RRSP, your annual taxable income decreases by that amount. You therefore pay less income tax. This decrease in net income also enables you to take advantage of higher government benefits or to obtain certain tax credits, as applicable. There are some restrictions, however.
First, you must respect the annual contribution limit to avoid being penalized. This amount is established as follows: 18% of your earned income in the previous year, to a maximum of $26,010 in 2017. Your income, and the Canada Revenue Agency, therefore determine the annual maximum contribution you may make to your RRSP. Consult your Notice of Assessment from the Canada Revenue Agency at www.canada.ca to determine the maximum amount you may contribute. If you overcontribute, the penalty is 1% a month of the excess amount, until it is withdrawn from the account. Note that any contributions to your employer’s pension plan reduce the amount that you may invest in an RRSP and that a lifetime overcontribution of $2,000 is allowed without penalty, but is not tax deductible.
Next, any withdrawals are taxable. Your tax deduction is in fact only a deferral of taxation. As a result, if you withdraw an amount from your RRSP when your tax rate is high, it will be more costly for you. It is quite likely that your annual income will be lower during retirement. It’s therefore wise to wait until then to withdraw funds from your account. Moreover, if you have reached the annual contribution limit, the amounts withdrawn cannot be put back into your RRSP.
Another important fact that you need to remember about RRSPs is that you must convert your RRSP into a Registered Retirement Income Fund (RRIF) no later than December 31 of the year in which you turn 71. You may not contribute to your RRSP after that age.
Lastly, the deadline to contribute and to receive a tax exemption is the 60th day of the year following the taxation year. In 2018, that date is March 1. After that date, your tax benefits will not apply until 2018. Note that any contribution room not used during the year may be carried forward to subsequent years.
From January 1 to March 1, 2018, if you open an RRSP or a TFSA with FERIQUE Investment Services or make a contribution to your RRSP or TFSA, you’ll be eligible to win one of 10 prizes, each worth $1,000. For more details.
FERIQUE Fund Management offers portfolios and mutual funds with management fees that are among the lowest in the industry.1 Moreover, through FERIQUE Investment Services, its main distributor, you have access to objective advice and personalized assistance at no additional cost.
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Or contact one of the Mutual Fund Representatives at the Advisory Services of FÉRIQUE Investment Services for personalized advice.
To answer your questions and facilitate your transactions, Advisory Services will have extended business hours from February 15 to March 1.
|Monday to Friday, regular schedule||8:00 a.m. to 8:00 p.m.|
|Thursday, February 15 to Friday, February 23||8:00 a.m. to 9:00 p.m.|
|Saturday, February 24||9:00 a.m. to 5:00 p.m.|
|Monday, February 26 to Thursday, March 1||8:00 a.m. to 9:00 p.m.|
1 The management expense ratios of the FÉRIQUE Funds are among the lowest in their reference universes in Canada according to Fundata.
FÉRIQUE is a registered trademark of Gestion FÉRIQUE and is used under license by its subsidiary, Services d'investissement FÉRIQUE. Gestion FÉRIQUE is an Investment Fund Manager and assumes management duties in relation to the FÉRIQUE Funds. Services d'investissement FÉRIQUE is a Mutual Fund Dealer and a Financial Planning Firm, as well as the Principal distributor of the FÉRIQUE Funds. Please note that for commercial purposes, Services d'investissement FÉRIQUE is also known in English as FÉRIQUE Investment Services.
There may be brokerage fees, trailing commissions, management fees and expenses associated with investment in the Funds. Management expense ratios vary from one year to another. Please read the prospectus before investing. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of a Fund or returns on investment in a Fund. Mutual funds are not guaranteed, their values fluctuate frequently and past performance may not be repeated.
FÉRIQUE Funds pay management fees to Gestion FÉRIQUE allowing it to assume the fees of the portfolio managers, the fees relating to the marketing or distribution of the FÉRIQUE Funds and the administration fees of the manager of the FÉRIQUE Funds. Each of the Funds pays all of its own operating expenses. No commissions are payable by the unitholders for a subscription in the FÉRIQUE Funds if such subscription is made through Services d'investissement FÉRIQUE; brokerage fees could however be payable should the subscription be made through a broker other than the principal distributor.