RRSP Summary

RRSP Summary
Setting up an RRSP:
1. Research different RRSP investments
2. Shop around
3. Choose the company you prefer
4. Fill out application form
5. Open the account and transfer your funds
6. Keep all your receipts and tax forms
Contributing to an RRSP:
RRSP Contribution Limits:
Using the basic formula RRSP contribution room for the current year = Sum of:
1. Unused RRSP room from prior years,
Plus
2. Lesser of:
A. RRSP dollar limit for the current year (for 2012 this amount was $22,970)
B. 18% of earned income for prior year
Less: Pension adjustment for prior year
Contributions of Property
Additional/Excess Contributions
Transfers:
Options available:
1. Transferring retiring allowances (severance pay) to an RRSP
2. Transfer of Registered Pension Plan (RPP) to an RRSP
3. Commutation Payment from RRSP
4. Annuities have two types

RRSP Withdrawals:
• Prior to maturity or at maturity
• RRIF
• Partial withdrawals
• Home Buyers’ Plan
• Lifelong Learning Plan
Death of an RRSP Annuitant:
• Matured RRSP
• Unmatured RRSP
Rules and Schemes to be aware of:
Anti-avoidance rules for RRSPs:
• Non-qualified investments o Imposes a tax equal to 50% of the FMV at acquisition or when existing investment became non-qualified
• Prohibited investments o Investment to which the RRSP annuitant is closely connected. Includes:
 Debt of the RRSP annuitant
 Investments in which annuitant owns a significant interest (10% or more), or where you do not deal at arm’s length o Imposes a tax equal to 50% of the FMV at acquisition or when existing investment became prohibited
RRSP Schemes to avoid:
• Withdrawal of funds from RRSP without paying tax
• Immediate access to assets in “locked-in” RRSPs
• Income tax receipts providing deductions of 3 times or more the amount actually invested in an RRSP
• Unrealistic returns on investments