The RRSP Deadline: What You Need to Know
It’s February, which means, among other things, that it’s RRSP season. When it comes to RRSPs, there are a number of important dates for Canadians to keep in mind, the least of which is the RRSP deadline. If you find the rules around when to contribute to RRSPs confusing, as well as RRSP related programs like the Home Buyers Plan, or the Lifelong Learning Plan, you’ve come to the right place. Are you ready? Let’s get started.
What Is the RRSP Deadline All About?
The first thing I should point out is that you can contribute to your RRSP at any point in the year. The RRSP deadline is purely a tax-related matter. In other words, it represents the last day in which contributions to your RRSP can be used as a tax deduction against your previous year’s income.
For most years, that date is March 1st, however, for the 2019 tax year, the RRSP deadline is March 2nd, 2020, because March 1st falls on a Sunday (non-business day). So, if you plan on using your RRSP to save on your taxes this spring, you need to make sure all contributions are made prior to March 2nd. Any contributions after that date can be put towards the following tax year.
A Tip for Your Last-Minute RRSP Contribution
No matter how well documented the RRSP deadline for contributions is, there will always be the stragglers, those rushing to make their contribution in the days leading up to March 1st (March 2nd this year). It’s not always a procrastination issue, however. Sometimes, people are waiting on the necessary tax slips to complete their return, only to discover at the last minute, that they must top up their RRSP in order to avoid paying tax. If you find yourself making a last-minute contribution, don’t feel that you have to rush to a decision on how to invest that money long term.
‘Parking’ Your RRSP Contribution
Most financial institutions offer an RRSP savings account where you can ‘park’ your contribution until you have more time to make a proper investment decision. The RRSP savings account should not be looked at as a long term investment solution, as the interest rates will be negligible, rather, it’s meant to be a short term holding account.
If the RRSP deadline is approaching and you don’t yet have an RRSP account open, you have plenty of options. You could visit the nearest branch where you do your banking, or, you can open an RRSP from the comfort of your living room, via an online bank like Tangerine, or a robo advisor like Wealthsimple. This is a route more and more Canadians are opting for these days, due to the convenience, low fees, and higher interest rates.
When Will I Receive My RRSP Tax Receipt?
When you make an RRSP contribution, your financial institution will provide you with a tax receipt to use when you’re completing your taxes. If you’re dealing in-person with your bank, they will usually print you a receipt instantly, upon making your contribution. However, there are times when receipts must be mailed out. The mailing schedules will vary between financial institutions, but using the 2019 tax year as an example, here’s an approximate timeline:
For contributions made between March 2nd, 2019 and December 31st, 2019 – Receipts are typically mailed out during January 2020.
For contributions made in the first 60 days of 2020 (Jan.1st – March 2nd) – Receipts are mailed out sometime in March.
It’s important to note, that if you are like the vast majority of people today, and file your taxes electronically, you are not required to send in your tax receipts along with your return. So, theoretically, you can prepare your taxes before your RRSP contribution receipt arrives in the mail. Of course, you should always have your tax receipts handy at a later date, should the CRA request a copy.
Other Important RRSP Dates to Remember
In addition to the deadline for RRSP contributions, there are a few other RRSP-related dates that you may want to know about. Here’s a list of a few important ones.
RRSP to RRIF Conversion
Your RRSP must be converted into a Registered Retirement Income Fund (RRIF) by December 31st of the year in which you turn 71. If you don’t visit your financial institution to have this done, it will usually be forced through, as you cannot hold funds in an RRSP after you turn 71.
Home Buyers Plan (HBP)
Did you know? You can borrow funds from your RRSP to put towards the down payment of your first home. But there are some rules that apply. One of them is that you must buy or build a qualifying home by October 1st of the year after you make the RRSP withdrawal. Check out my full Home Buyers Plan Guide for more information.
Lifelong Learning Plan (LLP)
In addition to the HBP, you can also borrow funds from your RRSP to help fund your post-secondary education. But, like the HBP, the funds must be paid back to your RRSP over a number of years. If you do make an LLP withdrawal from your RRSP, you must receive a written offer to enrol at a qualifying post-secondary institution before March of the year following your withdrawal. My Lifelong Learning Plan Guide contains everything you need to know.
Registered Disability Savings Plan (RDSP)
The RDSP is a government registered savings plan designed to help Canadians with disabilities save for their future. There is a government matching component as well as an income-tested bond. If you’re you’re planning to open an RDSP account and make a contribution in order to qualify for the match, and the bond, it must be done by December 31st.
There Is Still Time to Contribute to Your RRSP
Now that you know how the RRSP deadline works, I have some good news – there is still time to contribute. That is, if you are reading this prior to the deadline. As a reminder, for tax purposes, the last day for RRSPs for the 2019 tax year, is March 2, 2020. All you need to decide now is how much to contribute. It’s a question only you, or your accountant, can answer.