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Register Retirement Savings Plan (RRSP)

How much can I contribute?

Each year the government will allow you to contribute a specified amount to an RRSP, which is known as your RRSP contribution limit. It is calculated as 18% percent of the amount of income earned from the previous year's employment less the value of your previous year's Pension Adjustment. Your Pension Adjustment is a function of the contribution made to your company pension plan, either by yourself or your employer.

As well if you did not use all of your RRSP deduction limit for the current year you can carry forward unused contributions to future years. Therefore, your RRSP deduction limit could be more than the contribution limit based on your personal situation.

The 2011 RRSP contribution limit is 18% of your previous year's earned income to a maximum of $22,450 less previous year's pension adjustment (PA) plus current year's pension adjustment reversal. The easy way to find your limit is to check your Notice of Assessment that Canada Revenue Agency sent back to you after you filed your taxes last year.

What is a spousal or common law partner RRSP?

A spousal or common law partner RRSP lets you contribute to an RRSP in the name of your spouse (including common law partners) and claim that contribution as a deduction against your own taxable income. As long as the total contributions you make to your own and/or a spousal RRSP do not exceed your personal RRSP contribution limit, you may contribute as much as you like to a spousal RRSP. This contribution does not affect what your spouse can contribute to his or her own RRSP.

The benefit of the spousal plan is to build up two RRSP plans of equal value at retirement. This way, at retirement you'll likely pay less tax by withdrawing the same amount of income from two plans than one large income from one plan.

Spousal RRSPs are an especially important financial tool when one spouse is not working, has no pension plan, or has a significantly smaller income.

Note: If your spouse makes a withdrawal from a spousal RRSP before two complete calendar years since the last contribution was made, you, as the contributor, will be required to include the withdrawn amount, to the extent of the contribution, as your taxable income.

What is a Self-Directed RRSP?

A Self-Directed RRSP is a plan within which you make the ongoing investment choices for your plan with the help of your financial advisor. In a self-directed RRSP, you may invest in a variety of different types of investments, eligible or approved by Canada Revenue Agency.

What Investments Qualify For Your RRSP?

Qualified investments is the term used for investments that can be held in an RRSP or RRIF. These investments generally include:
• Canadian dollar savings accounts, guaranteed investment certificates, term deposits
• shares of Canadian and foreign companies listed on a prescribed stock exchange,
• shares of some over-the-counter U.S. and Canadian companies, shares of some small businesses
• certain types of bonds and money-market investments such as treasury bills, Canada Savings Bonds, Government of Canada bonds, provincial government bonds, Crown Corporation bonds, bonds issued by Canadian corporations listed on a prescribed stock exchange, and certain strip bonds
• certain types of mortgages, including your own
• certain covered call options, married put option, warrants and rights
• mutual funds