2013 RRSP Deadline

2013 RRSP Deadline - (for the 2012 Canadian tax filing year)

  • March 1, 2013: RRSP Deadline - Deadline for contributing to your Registered Retirement Savings Plan (RRSP) for the 2012 tax filing year.
  • April 30, 2013: Tax Deadline - CRA 2012 personal income tax filing deadline.


More about RRSP:

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While the deadline for RRSP contributions in 2013 is many months away, it’s smart to start thinking about it now. What’s even smarter? Using your tax return – whole or in part – to start funding this year’s contribution right away.

For many people, the end of the fiscal year brings a scramble to maximize RRSP contributions. By starting the year with a large transfer, you reduce the chances that you will be part of that crowd. Getting in the habit of regular contributions is also a great idea.

Tax returns are often seen as a source of bonus money, an amount not taken into account in the family budget. While it might be more exciting to treat yourself with this money, you can choose to simply add it to your RRSP. If you weren’t planning on spending it, it will not be missed.

Don’t forget that contributions to an RRSP are tax-free. Saving for your future is therefore a twofold economy: you are putting money away and getting a tax break. This is a great habit to get into!


RRSP or TSFA, or Both

Did your income go down in 2012? If so, it might not be the best time to invest in your Registered Retirement Savings Plan. But it might be the perfect time to invest in a Tax-Free Savings Account. This is because your tax savings  from an RRSP could be higher when your income rises. On the other hand, with a Tax-Free Savings Account you’ve already paid taxes on the capital you’re investing.  Confused? You’re not alone! Many Canadians don’t understand the nuances of TFSAs and RRSPs, which means they are unable to maximize savings on these investments.

An RRSP gives you a way to invest in your retirement while saving on income tax right now. RRSPs are designed around the idea that your income will probably be lower once you’ve retired than it is while you’re hard at work. So, once you retire, your tax payable will be lower since you’ll most likely fall into a lower income tax bracket. Essentially, an RRSP helps you defer taxes to maximize savings. It lets you increase the funds you’ll have later – when you’re paying less in income taxes and lowers the taxes you pay now, while you’re at a higher income tax bracket.

But does it actually make sense for you to put money toward an RRSP with your current financial situation? Maybe it would be wiser to invest in a TFSA. A TFSA is a method of investing where you pay no income tax on the money earned in that account. When you take money out of this account later, you get tax-free funds – you’ve already paid the taxes at the time of investment!

With this information in mind, you should ask yourself, “Would it be better for me to pay taxes now or later?”  If you decide to go the “pay later” route,  the deadline to purchase RRSPs for your 2012 tax return is March 1, 2013.


Should I put my money in a new Tax Free Savings Account or in my RRSP?

A:  First, let’s review what a TFSA and an RRSP are for anyone who’s not familiar. A tax-free savings account is a new form of savings account that was introduced in the 2008 federal budget. A TFSA allows Canadians to invest up to $5,500 per year and never be taxed on the interest they earn. For a complete overview of TFSAs, check out this article. RRSPs, or Registered Retirement Savings Plans, have been around for a lot longer. An RRSP is a retirement plan that you or your spouse/common-law partner contribute to, up to your annual deduction limit (set by the government). You can then use these RRSP contributions to reduce how much tax you have to pay.

You can hedge your bets and invest in both and RRSP and a TFSA, but if you want to pick one, consider the following: RRSPs give you tax benefits now, while TFSAs are tax-free when you withdraw the money, including the interest you made. If you think you’ll be in a lower tax bracket when you start to tap into the money later in life, go for an RRSP as you’ll get relatively bigger tax relief now and smaller tax burden later. If you expect to be making more money when you start withdrawing funds, a TFSA is the better option because you’ll escape paying a higher rate in the future. Also, a withdrawal from a RRSP doesn’t create new contribution room but a withdrawal from a TFSA does, so they’re a lot more flexible.

And if you think you’ll have the same tax rate when you’re contributing and withdrawing money, the TFSA is better option because it’s more flexible. Unlike RRSPs, you won’t have to pay tax on the amount you withdraw and withdrawals don’t affect government benefits that are tied to income. Before you commit, make sure that you shop around for the best deal you can get. Whether you choose an RRSP or a TFSA, your investment is only as good as the interest you’ll earn.