The RSP FAQ Blog

Scott McEachern |

The Retirement Savings Plan has been the cornerstone of financial planning for Canadians for many years. However, despite it's popularity, the rules and regulations that must be followed to remain onside can sometimes be confusing. We've taken an FAQ approach to answer the most often asked questions at our office.

How many years can I contribute to my RSP?

You may continue to contribute to your RSP up to and including the end of the year in which you turn 71 years of age providing you have earned income.

How old do I have to be to open an RSP?

As an Ontario resident, you can open an RSP as soon as you have qualifying earned income. Even a child who has earned income from a paper route or other job can open an RSP.

How often should I contribute to an RSP? 

This is one of those “it depends” answers. We recommend starting a monthly plan, and increasing the amount you contribute each month annually.

How much can I contribute to an RSP?

You can find your personal contribution limit on your Notice of Assessment from Canada Revenue Agency (CRA), which you receive each year when you file your income tax return. In general, you can contribute the lower amount of 1) up to 18% of your previous year's "earned income", or 2) the maximum limit amount each year. For 2019, the maximum is $26,500.

Can I withdraw from my RSP?

The money invested in your RSP is always accessible. However, you should consider the consequences of early withdrawal and potential fees associated with withdrawing. Some banks and companies charge fees to withdraw or transfer to other institutions.

While investing money in an RSP is tax deductible, when it is withdrawn, it is considered income and is therefore taxed. If you do withdraw, you also lose that contribution room going forward forever.

There are two special programs where you can withdraw your money tax free: 1) Home Buyers Plan and 2) Lifelong Learning Program. Even both these programs have rules that must be followed and re-paid to remain tax free. Feel free to ask us for specific details.

How much will I save on taxes? 

 This depends on your current tax rate. For example, if your marginal tax rate is 35% and you contribute $5,000 to your RRSP, your tax benefit will be $1,750.