The RRSP deadline for the 2021 tax year is March 1st, 2022.
That means that contributions to the RRSP can be made until that date for the 2021 tax year.
Why is the RRSP Deadline Important?
The RRSP deadline determines when you can make contributions for which you receive a tax refund.
If you meet the deadline, you can deduct contributions from your taxes for the current tax year.
It means you get the double benefit of tax deductions and tax-sheltered retirement investments.
If you want to use your tax refunds to invest in your RRSP, meeting the RRSP deadline is a worthwhile goal.
That way, your investment into your retirement can grow even further.
You do not pay taxes on the investment gains of your RRSP accounts while they remain inside the tax-sheltered account.
You pay taxes when you start withdrawing the funds in retirement.
So, it makes sense to take advantage of the financial benefits that come with meeting the deadline.
Meeting the RRSP deadline is also important to ensure that you do not forget to contribute to the RRSP, and therefore miss out on the tax benefits and growth.
What Happens if You Miss the RRSP Deadline?
If you miss the RRSP deadline, you miss out on the significant tax break your contributions provide.
You thus miss out on an opportunity to lower your tax burden while maximizing your retirement savings.
You are allowed to carry forward your unused contributions, up to your contribution limit.
Every year that you don’t contribute the maximum amount, you can contribute the difference in later years to catch up on your total maximum contribution.
While you can catch up on RRSP contributions later, the financial reality for most people is that it becomes progressively harder to catch up.
If you don’t contribute on time now, you have to contribute twice as much next year to maximize your tax breaks.
You also miss out on the immediate tax breaks that come with contributing before the deadline.
Frequently Asked Questions
- When can I start contributing to my 2021 RRSP?
You can contribute to your 2021 RRSP anytime. You have until March 1st, 2022 to make your contributions for tax benefits. You can make a contribution anytime during 2021 or in 2022 before the deadline.
- How much can I save on taxes through RRSP contributions?
The amount you can save through RRSP contributions depends on your province how much you are eligible to contribute and your tax bracket. The 2022 RRSP contribution limit is $29,210. You can contribute far less than that. However, maximizing your RRSP contributions provides the best tax benefits.
According to StatCan, “The median after-tax income of Canadian families and unattached individuals was $62,900 in 2019”
So, for example, if you live in Ontario and your income is $62,900 for 2022, you can save:
- $1,482 by contributing $5,000
- $2,965 by contributing $10,000
- $4,447 by contributing $15,000
Talk to a tax accountant for specific information for your income and contribution limit.