A Reminder about RRSPs and TFSAs
It is the start of the new year, but we are coming up to the contribution deadline for your Registered Retirement Savings Plans (RRSP) for the 2023 tax year.
The deadline to make a contribution to offset 2023 taxable income is Thursday, February 29th, 2024. The maximum RRSP contribution limit for 2023 is $30,780. However, to confirm your personal 2023 RRSP contribution limit, please refer to your Notice of Assessment generated by the Canada Revenue Agency (CRA) after you filed your 2022 income tax return, or contact your financial advisor.
Contributing to an RRSP account may offset your tax payable or generate a tax refund, by reducing your taxable income. RRSPs play an important role in retirement income planning and can be very helpful in reducing your overall tax payable in higher income earning years. For those purchasing their first home, RRSPs can be used to help fund a down payment. RRSP contributions aren’t a one-size-fits-all solution, and they may not be the preferred option for retirement planning for everyone.
TFSAs are a little different. These accounts may also help fund your retirement income, but do not provide any income tax offset as these contributions do not reduce your taxable income. TFSAs do, however, grow and earn income on a tax-free basis. Your contribution room does not disappear if you don’t use it in any one given year. The TFSA contribution limit for individuals in 2023 was $6,500 and the new amount for 2024 is $7,000. For someone who has never contributed and has been eligible for a TFSA since it was introduced in 2009, they now have $95,000 in total contribution room. We often advocate for our clients to regard these accounts as a Tax-Free Investment Account, instead of a savings account, as the growth and income is tax free.
As financial advisors, it is our role to help our clients with their financial planning and make sure that their investment portfolio suits their goals. We help our clients determine which amounts should be contributed to which accounts, according to their individual circumstances. Call your financial advisor today for guidance.
Please remember that the RRSP contribution deadline for the 2023 tax year is Thursday, February 29th, 2024.