Registered Retirement Savings Plan (RRSP) season is here again. Here are some questions to ask as you consider using the RRSP to its fullest benefit:

Have you maximized your RRSP contribution? Don’t overlook the opportunity to reduce personal tax liabilities or take advantage of tax-deferred growth. The last day to make contributions for the 2020 tax year is March 1, 2021. Contribution limits are 18 percent of your previous year’s earned income, to a maximum of $27,230 for the 2020 tax year, less any pension adjustment or past service pension adjustment, plus unused contribution room carried forward.

When was the last time you updated beneficiary designations? The start of the year may be a good time to review your designations and ensure that they are updated in the plan documentation.* Understand that there may be tax consequences to your estate depending upon who has been named as beneficiary(ies). There may also be considerations to address when designating a minor child (depending on provincial/territorial laws), an individual with a disability, or non-residents.

Will you benefit from a spousal RRSP? Consider the opportunities to split income through the use of a spousal RRSP (or common-law partner). A spousal RRSP is a plan to which you contribute and for which you receive tax deductions based on your available contribution room, similar to a traditional RRSP. However, the difference is that your spouse is the annuitant, so any funds withdrawn are considered that spouse’s income and must be included in his/her income tax return. Thus, withdrawn funds will be taxed at a lower rate should your spouse pay tax at a lower rate than you.

The views expressed are those of Wes Ashton, Director of Growth Strategy and Portfolio Manager, and not necessarily those of Harbourfront Wealth Management Inc., a member of the Canadian Investor Protection Fund.

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