There are certain deadlines you just don’t want to miss. Also taking advantage of the Tax Savings and investing in your Retirement are BIG reasons not to miss the March 1st RRSP contribution deadline for your 2021 Tax Year.
Here are 5 Reasons way you should contribute to your RRSP by Tuesday March 1st
Potentially Lower your Income Tax Bill
You can claim your RRSP contribution as a deduction on your 2021 income tax return. Depending on the tax bracket you are in for Ontario, when you contribute to your RRSP, this reduces the overall income tax you pay. Also, if your income is lower one year, you can carry forward the deduction for your contribution to a future year when your income may be higher. That way, your tax savings are greater when you’re in a higher tax bracket.
Savings in your RRSP are Tax Deferred
Your RRSP helps you save for the future while deferring tax at the same time. After you’ve contributed to your RRSP account, you can invest the funds into a variety of financial products such as GICs, investment funds, segregated funds etc. to potentially grow the money that you've contributed tax deferred. By the end of the year in which you turn 71, your RRSP must either be transferred to a Registered Retirement Income Fund (RRIF) or Life Annuity or be withdrawn in cash. A RRIF is designed to provide you with regular installments of retirement income. In retirement, your other sources of income may potentially be lower than they were in the years you were funding your RRSP, and amounts withdrawn from the RRIF may, therefore, be subject to a relatively lower tax rate.
Use your RRSP for a Down Payment on your First Home or Further your Education
Did you know you can borrow from your RRSP to buy your first home or pay for your education? You can take out up to $25,000 for a down payment for your First Home under the Home Buyers’ Plan (HBP). You can also take out up to $20,000 to pay education costs for you or your spouse under the Lifelong Learning Plan (LLP). You won’t pay any tax on these withdrawals as long as you pay the money back within the specified time periods.
Spousal RRSP Tax Relief
A spousal RRSP can reduce your overall Income Tax owing. If you earn more money than your spouse, you can help build their retirement savings by contributing to a spousal RRSP. Retirement income will then be split more equally between the 2 of you — which may reduce the total amount of income tax you have to pay. Reach out to Celina Visser, Matthew Ball or Dave Johnson at Billyard Insurance Group-Guelph, they can help you understand how spousal RRSPs work!
Contributing to an RRSP now to Prepare for your Retirement
Depending on your personal circumstances, now could be the perfect time to make an RRSP contribution. While many are spending more time at home, this may also be a good opportunity to increase your knowledge about investing. Whether your RRSP contribution will be large or small this year, it may be more important now than ever to start a retirement savings plan to fund a comfortable and enjoyable retirement!
Many Canadians may not have saved enough money to fund their retirement. Starting with just one contribution, and a monthly savings plan that works for your budget, can help you start a successful retirement plan.
Want to learn more or make your RRSP contribution, you can contact an Advisor at BIG-Guelph today! Click or Call us direct at (226)780-0802.