Registered Retirement Savings Plans

RRSP Limits

Your RRSP limit for the current year is determined as follows:

• Your unused RRSP deduction limit carried forward from prior years
• Plus 18 percent of your previous year’s earned income ( up to a maximum of $16,500 in 2005, $18,000 in 2006, $19,000 in 2007, $20,000 in 2008, $21,000 in 2009 and $22,000 in 2010)
• Less any pension adjustment for the prior year ( for those who have company pension plans )

Timing
For an RRSP contribution to be deductible, it must be made within 60 days of the calendar year end (i.e., March 1, or February 29 in a leap year). If the deadline falls on a weekend, it is extended to the next business day.

Your Options At Age 71

Government legislation presently dictates that you have to collapse your Registered or “locked-in” money by December 31st in the year in which you turn 71. Upon doing so, you have three main options.

• 1	The first option is to cash the money in. However, since the money has accumulated tax-free, you would immediately have to pay tax on the entire amount. This is not a tax efficient solution, as you could instantly have to pay CCRA 50% of the total.
  2	Your second option is to convert the money into a life annuity. This may be an acceptable solution depending on your personal circumstances. This is especially popular for people who like certainty over what monthly or annual amounts they will be receiving for the rest of their life, and who do not wish to participate in potentially volatile markets.
  3	The third option is to convert the RRSPs into a Registered Retirement Income Fund. This is a popular option for those who want to minimize the amount of income they take out in the early years, thereby minimizing the amount of tax payable. It allows you the flexibility to change the amount of income you receive, and if you so desire you can continue to fully participate in the market. For more information on this, please go to our RRIF section.