This guide will particularly talk about RRSP contribution limit.

Ever since I immigrated from India to Canada as a Permanent Resident (PR), I have been researching retirement plans, investment options, and tax-saving investment opportunities. Thanks to the internet and the financial advisors I met in major Canadian banks, I was able to get introduced to the Registered Retirement Savings Plan (RRSP) in Canada.

The RRSP is a registered retirement plan in which you and your spouse or common law partner can contribute. The money in your RRSP account grows tax free. Furthermore, the RRSP contribution you make is deducted from your taxable income for the tax year. However, withdrawals you make from the RRSP are taxable.

RRSP Contribution Limit

The RRSP contribution limit for 2023 is 18% of the earned income you reported on your tax return in the previous year, up to the maximum limit of $30,780.

Earned income for RRSP

Your earned income is calculated by adding your employment earnings, self-employment earnings, and other types of income (like rental, CPP disability benefits, taxable wage loss benefits, alimony, employee profit sharing), then subtracting specific employment expenses and business or rental losses.

RRSP unused contribution room

The unused RRSP contribution room can be found by one of the below modes:

1. The RRSP Deduction Limit Statement, on your latest notice of assessment or notice of reassessment.
2. Your CRA account
3. Phone services by CRA

RRSP Contribution limit for different years

The maximum RRSP contribution limits for different years are given below.

You can find the RRSP contribution limit by referring to the notice of assessment that the Canada Revenue Agency sent you after you filed your tax return.

Any unused contribution room in the RRSP can be carried forward to the next year, up to the age of 71 years (after which you can no longer maintain an RRSP account).

Therefore, your RRSP contribution limit in any year is equal to the sum of 18% of your earned income you reported in your tax return in the previous year, up to the maximum limit of $30,780 and any unused RRSP contributions in the previous years.

Also please note that any contribution to a pension plan or deferred profit sharing plan (DPSP) through your employer during the previous year, will be deducted from your RRSP contribution room for the year.

RRSP contribution limit in a year = [(18% of your earned income you reported in your tax return in the previous year, up to the maximum limit, like $30,780 in 2023) + (Unused RRSP contributions in the previous years)]-[(contribution to a pension plan or deferred profit sharing plan (DPSP) through your employer during the previous year)]

Please note that you can find your unused contribution room on your most recent notice of assessment from the Canada Revenue Agency.

RRSP Contribution Limit 2024

The CRA announced the RRSP contribution limit for 2024 is $31,560. This reflects an increase of $780 from the maximum RRSP contribution limit in 2023.

RRSP Contribution Limit Calculator

RRSP Excess Contribution

If your RRSP account has $2,000 or less in excess of the RRSP contribution limit assigned to you, then no penalty will be charged.

However, if your RRSP account has more than $2,000 in excess, you will incur a tax equal to 1% of the highest excess amount in your RRSP per month, until the excess amount is withdrawn from your RRSP.

RRSP Contribution Deadline

Contributions to the RRSP account can be made at any time during the year, up until the first 60 days of the following year.

This means the contributions made in the RRSP in the month of January and February in the following year will also deducted from the taxable income of the current year.

For the tax year 2023, the contribution deadline to RRSP is February 28, 2024.

RRSP vs TFSA vs FHSA

Both TFSA and RRSP are excellent and secure savings and investment accounts, but they serve different purposes. Both accounts enable you to invest and grow your funds in a tax-deferred manner.

If you have a short-term goal like buying a car, or going on a holiday, then TFSA is your preferred plan. This is because withdrawals are tax-free.

On the other hand, RRSP is specifically designed for retirement savings. It is meant to help you save for your retirement.

Conclusion

As we have seen by now, the RRSP is a registered retirement savings plan. This means it is best for your retirement purposes. The RRSP contribution limit in a year is based on the maximum limit assigned by the CRA in that year, plus any unused contributions you have from the previous years and minus any earlier pension contributions that you have made.

The most recent assessment note from the CRA is the best guide on your RRSP contribution limit for the year. For the tax year 2023, the contribution deadline to RRSP is February 28, 2024.

The information, views, and data presented in this guide are the result of my own personal research and should not be considered as professional financial advice. I am not a licensed financial advisor, and any reliance you place on this information is at your own risk. It is recommended to consult with a qualified financial professional for any financial decisions.

I make no representations as to the accuracy, completeness, suitability, or validity of any information in this guide and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.