Navigating RRSP Contribution Limits as the Tax Deadline Approaches
With the annual RRSP contribution deadline of March 2 rapidly approaching, many Canadians are scrambling to determine how much they can contribute to their Registered Retirement Savings Plans. Julie Seberras, head of wealth planning at Manulife Wealth, recently joined BNN Bloomberg to offer expert guidance on this critical financial planning task.
Understanding Your RRSP Contribution Room
Seberras emphasizes that calculating your RRSP contribution limit is a fundamental step in effective retirement planning. The limit is typically 18% of your earned income from the previous year, up to a maximum annual amount set by the Canada Revenue Agency. For the 2025 tax year, the maximum contribution is $32,490, though individual limits vary based on income and past contributions.
"Many people overlook unused contribution room from previous years," Seberras notes. "You can carry forward unused RRSP contribution room indefinitely, which means your current limit might be higher than you think if you haven't maximized contributions in past years." This carry-forward provision allows Canadians to catch up on retirement savings during higher-income years.
Key Factors in Determining Your Limit
Several elements influence your specific RRSP contribution limit:
- Previous year's earned income: This includes employment income, business income, rental income, and certain other sources, but excludes investment income.
- Pension adjustments: If you participate in a registered pension plan at work, this reduces your RRSP contribution room.
- Past contributions: Any unused contribution room from previous years increases your current limit.
- Administrative errors: Seberras warns that mistakes in previous tax filings can affect your current contribution room.
The financial expert recommends checking your Notice of Assessment from the CRA, which clearly states your RRSP contribution limit for the current year. "This document is your most reliable source," she stresses, "as it reflects all the calculations the CRA has made based on your reported income and previous contributions."
Strategic Considerations Before the Deadline
With less than a week remaining until the March 2 deadline, Seberras advises taxpayers to act promptly but thoughtfully. "RRSP contributions provide immediate tax deductions that can significantly reduce your tax payable for 2025," she explains. "Even if you can't maximize your contribution this year, any amount contributed before the deadline will generate tax savings."
For those uncertain about their exact limit, Seberras suggests consulting with a financial advisor or using online calculators provided by financial institutions. She also reminds contributors that while the deadline for 2025 tax deductions is March 2, 2026, you can make contributions throughout the year that will apply to future tax returns.
As Canadians navigate this annual financial ritual, Seberras' guidance provides clarity on a process that often causes confusion. With proper planning and understanding of contribution limits, taxpayers can optimize their retirement savings while minimizing their current tax burden.
