RRSP Basics: Questions Answered

Luisa Hough • January 31, 2017

Guest post by Randy Cass,

Welcome to RRSP season, otherwise known as the one time of year you’ll willingly read an article with RRSP in the title. It’s not a traditionally exciting topic, we get it, but it’s an important one. A little planning now will pay off big time later. We’re going to walk you through some of the most common questions we hear. Let’s get into it!

What’s so special about the RRSP?

A Registered Retirement Savings Plan is an account (think of it as a basket) that holds savings and investments. The magic of the RRSP is twofold: contributions are made with pre-tax income, meaning you’ll get a tax refund, and investments grow inside your RRSP basket tax free. That’s right, the tax man isn’t allowed to stick his hands in there. Compound interest  is left to do what it does best, grow your nest egg!

Just remember deferring tax doesn’t mean you’ll avoid paying it altogether. You’ll have to pay taxes when you withdraw money during retirement just as you would on any other income. The idea is you should be in a lower tax bracket when you retire and take out money, therefore you’ll pay less tax overall. Making sense so far?

What kinds of things can I put in there?

You can fill your RRSP basket with investments like stocks, bonds, GICs, mutual funds, ETFs, and money market funds. A common misconception is that a RRSP is an investment you purchase. It’s an account you open (think basket) and fill with investments you buy.

How much can I contribute this year?

You can contribute up to 18% of your income to a maximum of $25,370 for 2016. Your contribution room accumulates over time so if you haven’t maxed out your contributions in the past (many people haven’t!) you’ll have even more room available. Check the notice of assessment you received with last years tax return, or give CRA a call, to find out exactly how much contribution room you have. Your accountant will be able to tell you as well.

What’s this contribution deadline I’ve seen advertised?

The stretch between New Years and the contribution deadline has been dubbed “RRSP Season” which you’ve likely seen advertised at local banks. March 1st 2017 is the latest you can contribute to your RRSP and have the deduction count for the 2016 tax year.

This doesn’t mean any contributions made during January and February 2017 have to be claimed against the 2016 tax year. If you want to make a contribution now and save part or all of the deduction for 2017 (perhaps you’re expecting your income to be higher) you can do that.

How often can or should I contribute to my RRSP?

All this RRSP season hype might give you the impression you can only contribute once a year, but that’s not true! You can set up regular automatic contributions  (monthly, quarterly, etc) and avoid the RRSP season rush altogether.

An unexpected expense came up, can I withdraw money from my RRSP to cover it?

You can, but it might not be your best option. Depending on how much you withdraw you’ll be charged a 10-30% penalty  and you’ll have to pay income tax on that money. Keep in mind you won’t be able to re-contribute the amount you withdrew at a later date. That contribution room is lost.

Two ways you can withdraw money without penalty is under the Home Buyers Plan  and the Lifelong Learning Plan. The former is eligible to first time home buyers while the latter is available if you enrol in a qualified education program.

What happens to my RRSP when I retire?

Regardless of when you decide to retire, you’ll have to close your RRSP by December 31t in the year you turn 71. You can withdraw all your money (and be hit with a hefty tax bill), purchase an annuity, or transfer it into a Registered Retirement Income Fund (RRIF). You don’t have to convert your RRSP to a RIFF when you turn 65 or at the same time you retire. You can convert it at anytime before you turn 71.

What should I consider when opening or moving my RRSP?

You’ll need to look at the fees you’re paying —these include management expense ratios (MERs) for any mutual funds or ETFs, trading commissions, and annual administration fees. You want to keep these fees low so your money can grow as much as possible. If you’re working with a financial advisor check your statements to verify how much you’re paying. If you’re looking for lower fee investment options consider going the self directed  route or opening account with one of Canada’s digital wealth advisors.

We think Nest Wealth  is pretty awesome, but you know, we’re biased.

That’s it for now. You made it! You’re well on your way to mastering your RRSP and reaching those retirement goals. Knowledge is power, my friends.

 

This is a guest post from Randy Cass , CEO of Nest Wealth, a Canadian asset management company, it was originally published  on their website on January 19th, 2017.

Recent Posts

Bank of Canada Rate Announcement Jul 30th, 2025

By Luisa & Candice Mortgages • July 30, 2025
Bank of Canada holds policy rate at 2¾%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario July 30, 2025 The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. While some elements of US trade policy have started to become more concrete in recent weeks, trade negotiations are fluid, threats of new sectoral tariffs continue, and US trade actions remain unpredictable. Against this backdrop, the July Monetary Policy Report (MPR) does not present conventional base case projections for GDP growth and inflation in Canada and globally. Instead, it presents a current tariff scenario based on tariffs in place or agreed as of July 27, and two alternative scenarios—one with an escalation and another with a de-escalation of tariffs. While US tariffs have created volatility in global trade, the global economy has been reasonably resilient. In the United States, the pace of growth moderated in the first half of 2025, but the labour market has remained solid. US CPI inflation ticked up in June with some evidence that tariffs are starting to be passed on to consumer prices. The euro area economy grew modestly in the first half of the year. In China, the decline in exports to the United States has been largely offset by an increase in exports to the rest of the world. Global oil prices are close to their levels in April despite some volatility. Global equity markets have risen, and corporate credit spreads have narrowed. Longer-term government bond yields have moved up. Canada’s exchange rate has appreciated against a broadly weaker US dollar. The current tariff scenario has global growth slowing modestly to around 2½% by the end of 2025 before returning to around 3% over 2026 and 2027. In Canada, US tariffs are disrupting trade but overall, the economy is showing some resilience so far. After robust growth in the first quarter of 2025 due to a pull-forward in exports to get ahead of tariffs, GDP likely declined by about 1.5% in the second quarter. This contraction is mostly due to a sharp reversal in exports following the pull-forward, as well as lower US demand for Canadian goods due to tariffs. Growth in business and household spending is being restrained by uncertainty. Labour market conditions have weakened in sectors affected by trade, but employment has held up in other parts of the economy. The unemployment rate has moved up gradually since the beginning of the year to 6.9% in June and wage growth has continued to ease. A number of economic indicators suggest excess supply in the economy has increased since January. In the current tariff scenario, after contracting in the second quarter, GDP growth picks up to about 1% in the second half of this year as exports stabilize and household spending increases gradually. In this scenario, economic slack persists in 2026 and diminishes as growth picks up to close to 2% in 2027. In the de-escalation scenario, economic growth rebounds faster, while in the escalation scenario, the economy contracts through the rest of this year. CPI inflation was 1.9% in June, up slightly from the previous month. Excluding taxes, inflation rose to 2.5% in June, up from around 2% in the second half of last year. This largely reflects an increase in non-energy goods prices. High shelter price inflation remains the main contributor to overall inflation, but it continues to ease. Based on a range of indicators, underlying inflation is assessed to be around 2½%. In the current tariff scenario, total inflation stays close to 2% over the scenario horizon as the upward and downward pressures on inflation roughly offset. There are risks around this inflation scenario. As the alternative scenarios illustrate, lower tariffs would reduce the direct upward pressure on inflation and higher tariffs would increase it. In addition, many businesses are reporting costs related to sourcing new suppliers and developing new markets. These costs could add upward pressure to consumer prices. With still high uncertainty, the Canadian economy showing some resilience, and ongoing pressures on underlying inflation, Governing Council decided to hold the policy interest rate unchanged. We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs related to tariffs and the reconfiguration of trade. If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate. Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases from tariffs and trade disruptions are passed on to consumer prices; and how inflation expectations evolve. We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled. Information note The next scheduled date for announcing the overnight rate target is September 17, 2025. Read the July 30th., 2025 Monetary Report

How Employment Status Impacts Your Mortgage Application

By Luisa & Candice Mortgages • July 23, 2025
Chances are if you’re applying for a mortgage, you feel confident about the state of your current employment or your ability to find a similar position if you need to. However, your actual employment status probably means more to the lender than you might think. You see, to a lender, your employment status is a strong indicator of your employer’s commitment to your continued employment. So, regardless of how you feel about your position, it’s what can be proven on paper that matters most. Let’s walk through some of the common ways lenders can look at employment status. Permanent Employment The gold star of employment. If your employer has made you a permanent employee, it means that your position is as secure as any position can be. When a lender sees permanent status (passed probation), it gives them the confidence that you’re valuable to the company and that they can rely on your income. Probationary Period Despite the quality of your job, if you’ve only been with the company for a short while, you’ll be required to prove that you’ve passed any probationary period. Although most probationary periods are typically 3-6 months, they can be longer. You might now even be aware that you’re under probation. The lender will want to make sure that you’re not under a probationary period because your employment can be terminated without any cause while under probation. Once you’ve made it through your initial evaluation, the lender will be more confident in your employment status. Now, it’s not the length of time with the employer that the lender is scrutinizing; instead, it’s the status of your probation. So if you’ve only been with a company for one month, but you’ve been working with them as a contractor for a few years, and they’re willing to waive the probationary period based on a previous relationship, that should give the lender all the confidence they need. We’ll have to get that documented. Parental Leave Suppose you’re currently on, planning to be on, or just about to be done a parental leave, regardless of the income you’re now collecting, as long as you have an employment letter that outlines your guaranteed return to work position (and date). In that case, you can use your return to work income to qualify on your mortgage application. It’s not the parental leave that the lender has issues with; it’s the ability you have to return to the position you left. Term Contracts Term contracts are hands down the most ambiguous and misunderstood employment status as it’s usually well-qualified and educated individuals who are working excellent jobs with no documented proof of future employment. A term contract indicates that you have a start date and an end date, and you are paid a specific amount for that specified amount of time. Unfortunately, the lack of stability here is not a lot for a lender to go on when evaluating your long-term ability to repay your mortgage. So to qualify income on a term contract, you want to establish the income you’ve received for at least two years. However, sometimes lenders like to see that your contract has been renewed at least once before considering it as income towards your mortgage application. In summary If you’ve recently changed jobs or are thinking about making a career change, and qualifying for a mortgage is on the horizon, or if you have any questions at all, please connect anytime. We can work through the details together and make sure you have a plan in place. It would be a pleasure to work with you!

Going Through A Divorce? Protect your Credit

By Luisa & Candice Mortgages • July 16, 2025
Divorces are challenging as there’s a lot to think about in a short amount of time, usually under pressure. And while handling finances is often at the forefront of the discussions related to the separation of assets, unfortunately, managing and maintaining personal credit can be swept aside to deal with later. So, if you happen to be going through or preparing for a divorce or separation, here are a few considerations that will help keep your credit and finances on track. The goal is to avoid significant setbacks as you look to rebuild your life. Manage Your Joint Debt If you have joint debt, you are both 100% responsible for that debt, which means that even if your ex-spouse has the legal responsibility to pay the debt, if your name is on the debt, you can be held responsible for the payments. Any financial obligation with your name on the account that falls into arrears will negatively impact your credit score, regardless of who is legally responsible for making the payments. A divorce settlement doesn’t mean anything to the lender. The last thing you want is for your ex-spouse’s poor financial management to negatively impact your credit score for the next six to seven years. Go through all your joint credit accounts, and if possible, cancel them and have the remaining balance transferred into a loan or credit card in the name of whoever will be responsible for the remaining debt. If possible, you should eliminate all joint debts. Now, it’s a good idea to check your credit report about three to six months after making the changes to ensure everything all joint debts have been closed and everything is reporting as it should be. It’s not uncommon for there to be errors on credit reports. Manage Your Bank Accounts Just as you should separate all your joint credit accounts, it’s a good idea to open a checking account in your name and start making all deposits there as soon as possible. You’ll want to set up the automatic withdrawals for the expenses and utilities you’ll be responsible for going forward in your own account. At the same time, you’ll want to close any joint bank accounts you have with your ex-spouse and gain exclusive access to any assets you have. It’s unfortunate, but even in the most amicable situations, money (or lack thereof) can cause people to make bad decisions; you want to protect yourself by protecting your assets. While opening new accounts, chances are your ex-spouse knows your passwords to online banking and might even know the pin to your bank card. Take this time to change all your passwords to something completely new, don’t just default to what you’ve used in the past. Better safe than sorry. Setup New Credit in Your Name There might be a chance that you’ve never had credit in your name alone or that you were a secondary signer on your ex-spouse’s credit card. If this is the case, it would be prudent to set up a small credit card in your name. Don’t worry about the limit; the goal is to get something in your name alone. Down the road, you can change things and work towards establishing a solid credit profile. If you have any questions about managing your credit through a divorce, please don’t hesitate to connect anytime. It would be a pleasure to work with you.

Luisa & Candice Mortgages 

Contact Me Anytime!

The best way to get ahold of me is to submit through the contact form below. However feel free to give me a shout on the phone as well.

Contact Us