What’s my RRSP contribution limit for 2021? + MORE Jan 18th

Although I am 75 and collecting CPP and my company pension, I am still working. My gross income is over $200,000.

A friend said I should apply for OAS right away even though it will all be clawed back. I am worried about the tax ramifications.

—Greg

Old Age Security (OAS) can start as early as age 65 or be deferred to age 70. For each month of deferral, the pension increases by 0.6% (7.2% annualized). To be clear, that does not mean there is a 7.2% return if you defer OAS. You give up a year of pension to have a 7.2% higher pension for life. 

If you consider the cumulative OAS pension payments, if you defer by a year, you’ll be playing catch-up for the next 13 years. In other words, if you defer your OAS to age 66, it will take you until age 78 to receive more cumulative OAS compared to starting at age 65. 

If you defer your OAS to age 70, it would take only 11 years, to age 81, to catch up on the cumulative payments, but you’ll be that much older and have less time to catch up as well…

If you’re like many Canadians, you’re hoping you’ve paid enough tax in 2021 and may even be looking forward to a hefty tax refund. (The deadline for filing this year is April 30, 2022, which is on a Saturday, by the way. So you actually have until May 2, 2022 to file.) You can help ensure that happens by knowing the details of your registered retirement savings plan (RRSP), what sets them apart, your contribution limit and a whole slew of other things. Here are the basics:
What’s an RRSP?
A registered retirement savings plan, or an RRSP, is a savings account that you open at a bank or other financial institution. It is registered by the federal government of Canada for tax savings, and you can contribute to the account up to an annual maximum amount. 
What’s special about RRSPs?
Contributions to RRSPs are deductible, meaning they can be used to reduce your taxes. Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you withdraw money from the account…

Unlike at-home haircuts and hoarding toilet paper, do-it-yourself investing is a trend from the pandemic that’s here to stay. In 2020 alone, more than two million Canadians opened new self-directed investment accounts to buy and sell stocks and other securities—that’s more than twice the people who did the year before.

Regulators worry that without professional advice, investors with limited knowledge and information may lose money. You don’t need a degree in finance to be a successful investor, but it helps to have a carefully considered strategy. The key is common sense: Know your investing goals, be realistic about your risk tolerance, consider your time horizon and base your decisions on thorough research.

Let’s take a closer look at these four factors.

1. Set your investment goals

What are you saving up for—a short-term goal like home renovations or a wedding? Or a long-term goal like retirement or funding your child’s education? Your financial goals can help determine what investments you choose and which account types to use…

If I have $25,000 contribution room left in my RRSP, can I take that all at once plus my regular RRSP contribution of $27,230 for the tax year 2020? Effectively making a contribution of $57,230 to my RRSP?— Lorraine

The rules around RRSP contribution room 

As soon as a taxpayer starts to earn income—like employment income, self-employment income, royalties, research grants or net rental income—they accumulate room for their registered retirement savings plan (RRSP). There are no age limits, so a teenager with a part-time job can start to build their RRSP room as long as they file a tax return to report their earned income. 

How does RRSP carry forward work?

Your RRSP room carries forward, meaning the amount is cumulative. So, 18% of your earned income for the previous year, up to the current year’s maximum contribution limit, becomes your RRSP room for the year. For 2022, the maximum is $29,210 for taxpayers with at least $162,278 of earned income in 2021. This gets added to any previously unused RRSP room from the past…