Test your knowledge about RRSPs

Author: Sound Choices

February 15, 2019

The content in the article below is meant for Canadian investors only.

RRSP Season series:
What you need to know before opening an RRSP

You probably know that a Registered Retirement Saving Plan (RRSP) helps you save for retirement.

But how much do you know about RRSPs? Read on to test your knowledge.

1. An RRSP is not an investment.

It’s an investment account that can hold a variety of investments including GICs, mutual funds, stocks, bonds and ETFs.

2. You need to have filed an income tax return to open an RRSP.

The requirements for opening an RRSP include having filed an income tax return the previous year and declared earned income. This creates the contribution room for your RRSP. The amount of your contribution room is provided on your Notice of Assessment from the Canada Revenue Agency (CRA).

3. If your income isn’t “earned” it doesn’t build your contribution room.

Earned income includes full- and part-time employment income, self-employment income, net rental income, CPP/QPP disability payments. It does not include investment income (interest, dividend income and capital gains), CPP/QPP pension payments, OAS regular pension payments, income from RRIFs and annuities. (Note: this is not an exhaustive list.)

You also cannot contribute to an RRSP if you’re a non-resident or if your income consists solely of estate income, dividends, royalties or capital gains.

4. There is no minimum age for contributing to an RRSP.

However, you typically must have reached the age of majority to enter into the RRSP contract. And, as mentioned above, you need to have filed an income tax return. You’ll also need to have a Canadian Social Insurance Number and be a Canadian resident.

5. The maximum age for an RRSP is 71.

In the year you’re turning 71, your RRSP must be converted to a Registered Retirement Income Fund (RRIF) or an annuity or be collapsed by December 31.

6. Or is it?

After age 71, if you continue to have earned income, you can contribute to a spousal RRSP up until December 31 of the year your spouse or common-law partner turns 71.

A financial advisor can help you figure out the best way for you to save for your retirement. Talk to a financial advisor to learn how they can help you and visit AGF.com/RRSP.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.

The commentaries contained herein are provided as a general source of information and should not be considered personal investment or tax advice. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change investment decisions arising from the use or reliance on the information contained here.

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About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.