For
those who are nearing retirement, the amount of information available about
your Registered Retirement Savings Plan (RRSP) can be overwhelming. This
article gives you the key items you need to know in a nutshell.
Age
limit for contributing to an RRSP
The last
date that you can contribute to your RRSP is December 31 of the year you turn
69. Further, amounts cannot be transferred to an RRSP if you were over 69 at
the end of the tax year. If you cannot contribute to your RRSPs, because of your
age, you can still contribute to a spousal or common-law partner RRSP, if they are
69 or younger on December 31 of the year you make the contribution. The deadline
for all contributions to your RRSP is March 1 of each year.
Getting
payments from your RRSP
If
you are near retirement, you are probably thinking about getting payments from
your RRSP. You have a certain amount of flexibility on the types of payments
you can receive. Your RRSP issuer can tell you what your options are.
At
any age, up to the end of the year you turn 69, you can choose one of the following
options for your RRSPs:
- You can withdraw your RRSP funds.
When you withdraw funds from your
RRSPs, your RRSP issuer will withhold some tax.
- You can transfer your RRSP funds to a
Registered Retirement Income Fund (RRIF)
Starting in the year after you establish a RRIF,
you receive a minimum amount each year using a predetermined formula
based on the value of the RRIF and your age.
- You can use your RRSP funds to purchase an annuity.
Annuities offer
a guaranteed income for life or for a specified period.
Note: if
you own locked-in RRSPs, you will probably not be allowed to withdraw funds
from them. If you do not know if your RRSPs are locked-in, contact your RRSP
issuer. If your RRSPs are not locked-in, you can withdraw funds at any time.
To
learn more about RRSPs, read the Canada Revenue Agency's (Agence du revenue du Canada) publication RRSPs and Other Registered Plans for Retirement. This
publication is available on the CRA Web site at www.cra.gc.ca.
To learn if your RRSP will last throughout your retirement years, use the
retirement calculator available at www.retirementcalc.com.
Using the retirement calculator, you can view your retirement savings balance
and plan your withdrawals for each year until the end of your retirement. The results of your input assumptions are revealed
instantly.
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