Registered investments

The maximum amount you can contribute in a given year is your RRSP contribution room, which is indicated on the previous year’s federal Notice of Assessment. Each year, you can contribute up to 18% of your earned income of the previous year. Earned income includes employment income as well as net professional, business and real estate rental income. The annual contribution is subject to the following limits:

If you participate in an employer pension plan, your RRSP contribution room will be reduced by the annual pension adjustment (PA), which is calculated by your employer according to the terms of the pension plan. A past service pension adjustment (PSPA) can also reduce your contribution room if you buy back years of service during which you were an employee but did not contribute to the plan. If you leave the plan, the amount of your contribution room may be increased by the pension adjustment reversal (PAR) amount.

If you do not make the maximum contribution to your RRSP in a given year, the unused contribution room will be carried forward to a subsequent year.

The best way to maximize your retirement savings is to start investing early and set up a personalized strategy with your advisor.

Contributing to the RRSP of your spouse (married or common-law) enables you to realize tax savings by splitting your income at retirement. When two spouses have different incomes or expect to have unequal incomes at retirement, contributing to the RRSP of the spouse who will have the lower income at retirement is recommended.

Income splitting
The contributions you make to your spouse’s RRSP are calculated using your own contribution room and are deductible from your income, as the “contributor.” When withdrawals are made from your spousal RRSP, your spouse will pay the applicable taxes according to his or her tax rate. Since the RRSP income will be split between you and your spouse, your respective tax rates will be lower.

Three-year rule
In order to take advantage of income splitting, your contributions to your spouse’s RRSP must remain in the RRSP for at least three years, otherwise the withdrawal becomes taxable in your hands. However, this rule does not apply when the withdrawal is made as a minimum registered retirement income fund (RRIF) withdrawal.

RRSP ownership
When a spousal RRSP is set up, both the amounts invested in it and the generated income belong to the spouse; the contributor no longer has any rights to this RRSP. However, the sums accumulated in RRSPs during a marriage constitute part of the family patrimony (if applicable) and, in the event of marital breakdown, must be taken into account when this patrimony is split. The rules pertaining to family patrimony do not apply to common-law spouses.

You can contribute up to $2,000 in excess of the maximum amount allowed under your RRSP without being penalized. This leeway is granted only once in a lifetime. Although this excess contribution cannot be deducted from your income, it benefits from tax-sheltered growth. If you contribute more than the allowable excess amount of $2,000 to your RRSP, you will pay a 1% penalty per month, as long as this excess amount remains in your RRSP.

You can contribute to a RRSP up to the end of the calendar year in which you reach age 71. If you contribute to your spouse’s RRSP, your spouse must be 71 years of age or less on December 31st of the year for which the contributions are made.

Your RRSP must be converted into a RRIF no later than December 31st of the year in which you reach age 71.

Withdrawal in cash

Although it is possible to withdraw funds from your RRSP, this option is usually not recommended, as the amount withdrawn will be added to your taxable income and is also subject to tax withholdings. Depending on the situation and reason for the withdrawal, it is preferable to talk with your advisor to see which options are available to you.

Contribute early
Start contributing at the beginning of your career, because your investments will grow tax-sheltered for longer. The table below illustrates how contributions made earlier but over a shorter period can yield more retirement capital:

Contribute early in the year…
If you prefer making annual lump-sum RRSP contributions, it is better to do so in the beginning of the year.

… or make periodic contributions
Periodic contributions level out the average cost of the investments you hold in your RRSP, which reduces the risk of investing at the wrong time. What’s more, this strategy makes it easier to manage your budget.

Contribute to your spouse’s RRSP
If you and your spouse have different incomes, consider investing in a spousal RRSP. This will enable you to balance your incomes at retirement and reduce your overall tax bill.

Trust Convention

And if a RRSP is not enough?
Depending on the scale and extent of your needs, a RRSP may not suffice to generate the capital you will need for retirement. If this is the case, you will need to invest not only in a RRSP but also in other investment vehicles.

Your Advisor will help you determine the type of investments required to meet your retirement goals. Your Advisor can also help you achieve optimal allocation of your registered and non-registered assets.

This plan will be carried out in line with your personal retirement goals and your investor profile, with a view to benefiting from investment tax rules.

A Locked-in retirement account (LIRA) is an account to which you can transfer “locked-in” funds from an employer pension plan, subject to a provincial law, certain annuity contracts or another locked-in retirement account. Except under certain circumstances, you cannot make any withdrawals from a LIRA, the purpose of which is to provide a life income at retirement.

Addendum

A locked-in RRSP is used when funds are transferred from an employer pension plan that falls under federal rather than provincial jurisdiction. RRSP- or LIRA-eligible investments are also eligible for a locked-in RRSP.

Addendum

At retirement, or earlier if you wish, funds accumulated in a LIRA can be transferred to a life income fund (LIF) or can be used to buy a life annuity. As with an RRSP, this change must be made no later than the end of the year in which you reach age 71.

Note that there is no minimum age requirement for converting a LIRA into a LIF, which means you can withdraw a portion of your locked-in funds before you reach retirement age.

Withdrawal in cash

It’s important to note that it is more difficult to withdraw from a LIRA or locked-in RRSP, as these plans fall under different laws and conditions. Therefore, withdrawals can only be done in very specific situations.

A RRIF is an arrangement between you and a carrier (insurance company, trust company or bank) that is registered. You transfer the funds accumulated in your RRSP to the carrier and the carrier makes payments to you. The funds kept in a RRIF are tax-sheltered, but you are required to make minimum withdrawals each year.

These minimum withdrawals must begin no later than December 31 of the year following the establishment of the RRIF and are calculated on the basis of your age (or your spouse’s age) at the beginning of the year and the balance of the RRIF on December 31 of the previous year. There is no limit to the number of withdrawals you can make.

While minimum withdrawals are not subject to source deductions, any withdrawals above the minimum are. All amounts withdrawn from your RRIF, including minimum withdrawals, must be added to your income for the year in which you receive them.

Your age or your spouse’s?
You can choose either your age or your spouse’s to calculate your minimum RRIF withdrawals. You can always withdraw more than the required minimum from your RRIF, but if you wish to lower the amount of your minimum withdrawals, we recommend that you use the younger spouse’s age. As of age 65, you are entitled to a pension income tax credit on the first $2,000 withdrawn annually from a RRIF.

Trust convention

A LIF is a registered account in which you transfer the sums accumulated in your LIRA.

As of January 1, 2025, major changes have been made to Quebec LIFS.

• The LIF withdrawal limit has been completely removed for persons age 55 and over to give you greater flexibility when it comes to withdrawing funds during retirement. It should however be noted that accelerating your LIF withdrawals could have an impact on certain aspects of your financial planning (partition of the family patrimony, estate plan, creditor protection).
• LIF funds cannot be transferred directly to an RRSP, RRIF or non-locked-in VRSP account.
• New rules for calculating life income and temporary income from LIFs are now in effect for persons under age 55.

Visit Retraite Québec’s website for more information.

Addendum

The rules for a locked-in pension plan under federal jurisdiction are different.

• The minimal withdrawal each year is calculated in the same way as for a RRIF. However, you cannot withdraw more than the authorized maximum amount.
• The maximum withdrawal is determined each year according to different criteria (age, LIF balance, reference rate).

An annuity certain is an amount you receive periodically for a pre-determined period in exchange for your capital. The amount paid depends on your capital, the period you select and the prevailing interest rates at the time of the annuity purchase.

The amounts you receive periodically are taxable in the calendar year in which they are paid to you.

A life annuity is an amount paid to you periodically throughout your lifetime in exchange for your capital. It may include various features, such as a guarantee, reversibility to your spouse in case of death, indexing of the amounts paid, or integration of the amounts paid with public plans.

The amount paid to you depends on your capital, your age, your sex, the features of your annuity, the prevailing interest rates at the time of the annuity purchase, and the age and sex of your spouse (if the annuity is reversible to your spouse). A life annuity purchased with locked-in funds from a retirement plan must generally be 60% or more reversible to your spouse, unless he or she signs a written waiver to the contrary.

The amounts you receive periodically are taxable in the calendar year in which they are paid to you.

There is no annual contribution limit per child. Contributions can be spread over a 31-year period and may not exceed a total of $50,000 per child. Your Advisor will help you determine the amount you need to save each year according to your situation.

Intended for children age 17 and under, the CESG is a federal grant equal to 20% of the funds invested in a RESP account. The maximum annual grant is $500 per child, or 20% of the first $2,500 in contributions made. The maximum total grant over the life of a RESP is $7,200 per child.

If not fully used in a given year, the grant can be carried forward to a subsequent year. However, the total grant for a year may not exceed $1,000. As of 1998, grant room accumulates for a child until the end of the year in which the child turns 17.

For children age 16 and 17, the grant is paid only if at least $2,000 was invested in their RESP before they turned 16, or if at least $100 per year was invested in their RESP for four years prior to that birthday.

This tax measure consists of a refundable tax credit that can be added to the RESP. One person cannot be granted more than $3,600 in total for all of the RESPs of which he/she is a beneficiary.

The Educational Assistance Payment is an amount paid to a student from the student’s RESP to enable him or her to pursue post-secondary studies. The EAP comes from investment income and the CESG money accumulated in the RESP. It is taxable in the hands of the student beneficiary. The total EAP payable to a full-time student may not exceed $8,000 for the first 13 weeks of an eligible education program and $4,000 for each 13-week period of an eligible part-time education program for the registered beneficiaries. There are no subsequent limits. The principal invested in the plan is returned to you tax-free.

The best option would be to transfer the RESP to another beneficiary, if applicable. It is important to note that the maximum amounts of grants for an individual plan still apply, and any overage must be returned to the government.

If there is no additional beneficiary or the maximum grants have been received, the grant money received must be repaid to the government, whereupon the invested contributions will be returned to you. The income accumulated in the RESP can also be returned to you in the form of accumulated income payments (AIP). These payments must be added to your income and are therefore taxable, in addition to being subject to a 20% penalty (federal: 12%; provincial: 8%).

You also have a third option: you can transfer the accumulated income payments to your RRSP or that of your spouse, provided your RRSP contribution room allows you to do so. This transfer is not subject to a withholding tax and eliminates the 20% penalty. However, it may not exceed $50,000.

To exercise either of these options, the RESP must have been in place for at least 10 years and each beneficiary must be at least 21 years of age and ineligible for an Educational Assistance Payment.

You can also, under certain conditions, name a new beneficiary or pay income accumulated in the RESP to any Canadian post-secondary educational institution.

¹ The maximum annual grant is $500 (20% X $2,500 of contributions). Low-income families (less than $45,282) are entitled to a maximum annual grant of $600. Middle-income families (more than $45,282 but less than $90,563) are entitled to a maximum annual grant of $550.

A new Quebec grant has been offered since February 20, 2007 to children under 18 years of age. The lifetime limit is $3,600 per child and the maximum annual amount is $250 (10% X $2,500). Low-income families (less than $42,390) are entitled to a maximum annual grant of $300, and middle-income families (more than $42,390 but less than $84,780) are entitled to a maximum annual grant of $275.

Update: 2023-07-14

The group RRSP from Professionals’ Financial is easy to set up and flexible, which minimizes your administrative tasks.

• No administration fees or management fees for your company.
• Managing contributions is simple.
• No obligation to contribute to the plan.
• Your gateway is your Professionals’ Financial Advisor, who knows you well, can give you all the necessary information, and will assist you at each stage of the process.

Easily accessible, the Advisor assigned to your company can provide your employees with all the advisory services they need for their investments.

• Each employee retains ownership of their RRSP and has access to programs like the HBP or the LLP.
• Employees can obtain an immediate tax reduction, since contributions are deducted from their gross salary.
• According to their investor profile, they can customize their portfolio using a variety of Professionals’ Financial mutual funds.
• They have direct access to their RRSP account at all times via the Financial’s website.