Ten top RRSP questions answered

It’s that time of year again. RRSP season is upon us and before that March 1 deadline approaches, plenty of Canadians have questions about contributions, withdrawals and do’s and don’ts. Luckily, our experts have answered a lot of RRSP queries over the years. Are they a total waste of time? What happens if you over-contribute? How much money should you have in your account? Our friends at MoneySense have some answers.

Q: Are RRSPs ever a waste of time?

A: So, you have a Defined Benefit pension and don’t think RRSPs are worth your time? Depending on the situation (like if your spouse is out of work, or if they are in a lower tax bracket than you), contributing to an RRSP might be a great idea even if you have enough retirement savings. Here’s why.

Q: What are the differences between RRSPs and TFSAs?

A: The biggest differences are contribution limits, and how your money gets taxed upon withdrawal from the accounts. RRSP contributions are tax-deductible, whereas TFSA withdrawals are tax-free. Here are 6 more differences to know.

RELATED: What not to do with $100,000 cash: Hide it for a rainy day.

Q: How much should I have in my RRSP?

A: In your 20s, contributing shouldn’t be a priority but by age 35, you would have to start putting $10,500 a year into your RRSPs to reach a reasonable retirement goal of $500,000. You’ll have to adjust based on how much you’ll need in your golden years, of course. Here are the numbers by ages.

Q: How can I pay less tax on my RRSP withdrawals?

A: Some tips? Be aware of attribution rules and take out as little as possible to extend tax deferral.

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Q: What happens if I’ve over-contributed to my RRSP?

A: It depends on if it’s less than the wiggle room the CRA gives on over-contributions. Here’s what you should do.

Q: Does my spousal RRSP belong to just me?

A: Yes. Having a spousal RRSP doesn’t mean your partner will have more access to it.

Q: Is it smart to dip into RRSP savings when you’re earning less money?

A: You can, but it’s best not to. You have to remember how RRSP withdrawals are treated by the government.

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Q: Does it ever make sense to not contribute to your RRSP?

A: Yes. When you’re low-income, it might be best not to contribute to your RRSP. Here’s why.

Q: Would combining RRSP accounts save you money?

A: Combining RRSP accounts might save you in investing fees, but it might not be worth it. Here’s why.

Q: How does a mortgage inside an RRSP work?

A: Setting up a mortgage inside an RRSP requires a lot of work with low return. It has to be insured by the CMHC and you also need to charge commercial interest rates so your returns will be limited to 3-4%.