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RRSP Tips & Reminders

A contribution to an RRSP is deductible from your taxable income up to your contribution limit, which can be found on your previous year notice of assessment.

If you do not contribute up to your maximum contribution limit, the unused balance carries forward to future years.

Interest or gain inside an RRSP is not taxed until it is withdrawn.

You may over-contribute up to $2000 to your RRSP and the interest or gain on that amount is not taxed until it is withdrawn.

Penalties apply if your RRSP contains more than $2000 of non-deductible contributions.

There are different types of investments that qualify for RRSPs, you can chose between guaranteed investments or higher risk funds.

You may contribute to an RRSP up to and including the year you become 71, provided you have eligible contribution room.

You may contribute to a spousal RRSP and claim the contribution as a deduction on your tax return.

A spousal RRSP will be income of the spouse when it is withdrawn provided there has not been a contribution to any spousal RRSP within the year of withdrawal or either of the previous two years. Otherwise it is taxable income of the contributor up to the amount withdrawn or the amount of contributions made to the spouse's plan in the above time period, whichever is less.

You may contribute to a spousal plan after you reach age 71, if your spouse is 71 or younger in the year of the contribution, and you have the contribution room.

From age 65 to 71 you may convert your RRSP to an RRIF which will begin to pay out a regular periodic pension which qualifies for a pension deduction of up to $2000 each year.

At age 65, if you are receiving no other superannuation pension, it is advisable to convert an adequate RRSP to a RRIF to create enough pension income to utilize the annual pension deduction amount.

By Dec. 31 of the year you turn 71 you must close our all your RRSP accounts and convert them to RRIF accounts or some other suitable arrangement.

You may withdraw lump sum amounts from an RRSP at any time, but it will be taxed in full the year it is withdrawn.

Money borrowed to purchase an RRSP is not deductible. /pr>

Farmers may use RRSPs as an income-leveling tool by contributing in a high income year and withdrawing in a low income year. You must recognize however that you are using valuable RRSP room for purpose other than the retirement pension for which it was intended.