2020 Taxes and RRSPs: What You Need To Know

Updated:
June 30, 2021

RRSP 2020: What you need to know

A Registered Retirement Savings Plan (RRSP) is a great vehicle in Canada for effectively managing your tax-deferred retirement savings. Here is what you need to know when doing your 2020 taxes as it relates to RRSPs.

What is the RRSP contribution deadline for 2020?

The last day for RRSP contributions for 2020 is Monday, March 1, 2021.

What is the 2020 RRSP deduction limit?

The RRSP deduction limit for the 2020 tax year is $27,230 or 18% of your earned income from the previous tax year, whichever is less. However, it is important to review your personal 2020 RRSP deduction limit which is indicated on your 2019 Notice of Assessment from the Canada Revenue Agency (CRA).

Your individual RRSP deduction limit includes previously unused contribution room as well as the room created based on your 2019 earned income. If you cannot locate your Notice of Assessment, contact CRA at 1 (800) 959-8281.

What is the 2020 RRSP contribution limit?

The easiest way to find this is to locate your 2019 Notice of Assessment and look at the very bottom of the section calculating your RRSP limit. You will see a line that says “Available contribution room for 2020”. That is the amount of new money you can contribute to your RRSP in 2020.

Note: if you have made RRSP contributions previously that you have not yet deducted, then your RRSP contribution limit will be less than your RRSP deduction limit.

What are the RRSP withdrawal rules at age 71?

You can contribute to an RRSP in your name or your spouse’s name up to and including the end of the year that you turn 71 years of age. If you are older than 71, you would still be able to make an RSP contribution (based on your income) to a spousal RSP up to the end of the year your spouse turns 71.

RRSPs in your name must be converted to retirement income options (RRIFs, annuities, or combinations of the two) before December 31 of the year you turn 71. 

READ: RRIF Minimum Withdrawal Rules

‍Can I deduct my contributions made as a repayment for withdrawals made under the Homebuyer’s Plan (HBP) or Life Long Learning Plan (LLP)?

No. HBP and LLP repayments are not deductible. Such repayments are recorded on Schedule 7 of your tax return.

Do I HAVE to claim RRSP contributions in 2020 on my 2020 tax return?

No, you may deduct any amount up to your maximum deduction limit – including nothing at all. Carrying forward deductibility may make sense where you anticipate higher income in the future.

At the same time, you will be maximizing the future value of your RRSP by having contributed earlier. Discussing this question with your accountant/financial advisor is advisable.

My income last year consisted of pension or non-rental investment income (eg: dividends). Can I still make a deductible RRSP contribution?

Providing the CRA indicates you have not exceeded your 2020 RRSP contribution limit, you can make (and deduct) a contribution subject to the age requirements mentioned above. This can be particularly valuable where you have built up any unused RRSP contribution room over the years.  

What are the rules with RRSP over contribution? Can I contribute more than my maximum allowable limit?

You can. Provided the CRA indicates that you have an RRSP contribution limit, you may over contribute a cumulative lifetime total of $2,000 without penalty. However, you must be able to use any RRSP over-contribution as a deduction by December 31 of the year you turn 71.

READ: Avoiding the Penalty Box: Over-Contributing to RRSPs and TFSAs

Learn More About RRSPs and Taxes

Contact your advisor today to learn more about RRSPs and how they’re right for you.

FAQs

What is financial advising?

Financial advising involves providing guidance and advice to individuals, families, or businesses to help them make informed decisions about their financial matters. This can include various aspects such as investment planning, retirement planning, tax planning, estate planning, and more. Financial advisors analyze their clients' financial situations, goals, and risk tolerance to create customized strategies that align with their objectives.

Why is financial planning important?

Financial planning is crucial for several reasons:

Goal Achievement: It helps individuals set and achieve financial goals, whether they are short-term, such as buying a home, or long-term, like funding a comfortable retirement.

Risk Management: Financial planning addresses risks by considering insurance, emergency funds, and other protective measures.

Budgeting and Saving: It promotes responsible money management through budgeting and saving, fostering financial stability.

Wealth Building: Effective financial planning can lead to wealth accumulation and the creation of a secure financial future.

Can financial advisors help with debt?

Yes, financial advisors can help with debt management. They can assess your overall financial situation, create a budget, and develop strategies to pay down debt efficiently. They may also negotiate with creditors on your behalf, provide debt consolidation recommendations, and offer guidance on prioritizing and managing debt repayment.

What exactly does a financial advisor do?

The specific responsibilities of a financial advisor can vary, but generally, they:

  1. Conduct a thorough analysis of a client's financial situation, including income, expenses, assets, and liabilities.
  2. Develop personalized financial plans based on the client's goals, risk tolerance, and time horizon.
  3. Provide investment advice and portfolio management services.
  4. Offer guidance on retirement planning, estate planning, tax planning, and insurance.
  5. Monitor and adjust financial plans as needed based on changes in the client's life or market conditions.
  6. Educate clients on financial matters and empower them to make informed decisions.
What is the average fee for a financial advisor?

The fees charged by financial advisors can vary widely based on factors such as the advisor's experience, the services provided, and the region.

Common fee structures include:

Hourly Fees: Advisors charge an hourly rate for their services.
Flat or Fixed Fees: A set fee is charged for specific services or a comprehensive financial plan.
Asset-based Fees: Fees are a percentage of the assets under management (AUM).
Commission-based Fees: Advisors earn commissions on financial products they sell.
Combination of Fees: Advisors may use a combination of the above fee structures.
‍
It's important to discuss and clarify fee arrangements with a potential financial advisor before engaging in their services.