If you listen to the radio or watch television during the first two months of a calendar year, it is likely you will come across something referred to as “RRSP Season.” So, what exactly is this phenomenon?

RRSP Season refers to the first 60 days of the year when Canadians can make contributions to a Registered Retirement Savings Plan (RRSP) and apply it against the prior year’s income.

So, for a contribution to count against last year’s income, it must be made by March 1st (February 29th if it is a leap year). As a refresher, RRSP contributions reduce your taxable income. This can result in either a reduction in income tax owing or a tax refund – the particulars will depend on your employment situation.

In order to contribute to your RRSP, you first must have contribution room. This is accumulated from earned income at a rate of 18%, up to a predetermined maximum ($30,780 for 2023). For example, if you had $100,000 of employment income in 2022, your RRSP contribution room created for 2023 would be $18,000. It is important to note that unused RRSP room carries forward on an annual basis.

In summary, RRSP season refers to the first 60 days of the year when Canadians are commonly making contributions to their RRSPs. Of course, you can contribute to your RRSP at any point throughout the year – in fact it is recommended to do so. By maintaining RRSP contributions throughout the year, you take advantage of built-in benefits such as dollar-cost averaging and compound interest. With that said, RRSP Season still provides a great opportunity to review your tax situation from the prior year and determine if additional contributions should be made (if applicable).

Wanting to open a Registered Retirement Savings Plan or gather more information? Contact Jeff Graham at (604) 363-7549 or jeff@firstoakfinancial.ca.

DISCLAIMER: this commentary is provided for general informational purposes only and does not constitute financial, insurance, investment, tax, legal or accounting advice.