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Ten Burning RRSP Questions, Answered (Including How Much To Contribute)

What you need to know to get your plan ready for retirement.

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Are RRSPs a total waste of time? What happens if you over-contribute? How much money should you have in your account? Luckily, the MoneySense experts have answered a lot of RRSP queries over the years. Below, answers to top RRSP questions, from withdrawals to do’s and don’ts.

Are RRSPs ever a waste of time?
So, you have a Defined Benefit pension and don’t think RRSPs are worth your time? Depending on the situation (like if your spouse is out of work, or if they are in a lower tax bracket than you), contributing to an RRSP might be a great idea even if you have enough retirement savings.

What are the differences between RRSPs and TFSAs?
The biggest differences are contribution limits, and how your money gets taxed upon withdrawal from the accounts. RRSP contributions are tax-deductible, whereas TFSA withdrawals are tax-free.

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How much should I have in my RRSP?
In your 20s, contributing shouldn’t be a priority but by age 35, you would have to start putting $10,500 a year into your RRSPs to reach a reasonable retirement goal of $500,000. You’ll have to adjust based on how much you’ll need in your golden years, of course.

How can I pay less tax on my RRSP withdrawals?
Some tips? Be aware of attribution rules and take out as little as possible to extend tax deferral.

What happens if I’ve over-contributed to my RRSP?
It depends on if it’s less than the wiggle room the CRA gives on over-contributions. Here’s what you should do.

Does my spousal RRSP belong to just me?
Yes. Having a spousal RRSP doesn’t mean your partner will have more access to it.

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Is it smart to dip into RRSP savings when you’re earning less money?
You can, but it’s best not to. You have to remember how RRSP withdrawals are treated by the government.

Does it ever make sense to not contribute to your RRSP?
Yes. When you’re low-income, it might be best not to contribute to your RRSP.

Would combining RRSP accounts save you money?
Combining RRSP accounts might save you in investing fees, but it might not be worth it.

How does a mortgage inside an RRSP work?
Setting up a mortgage inside an RRSP requires a lot of work with low return. It has to be insured by the CMHC and you also need to charge commercial interest rates so your returns will be limited to three to four percent.

This article was originally published in February 2017 and updated in September 2017.