RRSP Season 2021 – Contribution Deadline of March 1, 2021

It’s that time of the year again when you get around 60 days to catch up on your RRSP contributions for the previous year. An RRSP account keeps your investments tax-sheltered (until withdrawal) and is a great way to save for retirement.

Officially, the 2020 RRSP Contribution deadline (i.e. 2021 RRSP Season) runs from January 1, 2020, to March 1, 2021.

During the RRSP season, you are allowed to make contributions to your RRSP account as though they were made during the 2020 tax year, and based on your contribution room as of December 31, 2020.

You will be able to claim a deduction for all eligible RRSP contributions made by March 1, 2021, from your 2020 income . The maximum RRSP contribution limit for 2020 was $27,230. The maximum RRSP contribution limit for 2021 is $27,830.

RRSP Season – Contribution Deadline of March 1, 2019

Why Make RRSP Contributions?

Looking for reasons to use up your RRSP contribution room from last year? Here are some ideas to consider:

1. Save On Taxes

You will get a refund on any taxes payable on the amount you contribute to your RRSP. This refund is equal to your marginal tax rate.

For example, if your marginal tax rate is 40% and you contributed $10,000 to your RRSP either during 2020 or before March 1, 2021, you can expect a tax refund of $4,000 relating to your RRSP contributions.

Basically, you will have saved $4,000 in taxes for 2020, or we can also say that you have deferred those taxes to the future.

For more on how to save on taxes by maximizing your RRSP contributions, check out this article.

2. Supercharge Your CCB

Following from point #1, contributing to an RRSP account lowers your taxable or net income. A lower net income can make you eligible for more income-tested government (provincial and federal) benefits, such as the Canada Child Benefits (CCB).

CCB benefits are updated every July i.e. after-tax returns are processed. With a lower taxable income in 2020, your recalculated CCB payments for the July 2021 to June 2022 period could be significantly increased, depending on where your income falls on the sliding benefits scale.

Another income-tested benefit that will benefit from you lowering your taxable income, is the GST/HST credit.

For some scenarios on how RRSP contributions can increase your CCB payments, click here.

3. Save for retirement

If getting a fat and juicy tax refund in April is not enough to motivate you to contribute to an RRSP account, or you do not get the CCB, there’s one additional reason to do so: Retirement!

The idea behind the creation of the RRSP is to encourage Canadians to save towards their retirement. It’s a WIN-WIN situation for you and the government.

You get to invest in a tax-deferred account, keeping and re-investing gains and staying tax-free until you start withdrawing funds in retirement. On the other hand, the government loses some revenue in the short term, only to recoup some of it back when you retire.

If you have a spouse or common-law partner, you can contribute to their RRSP as well.

Investing Options For Your RRSP

It makes sense to lower your investment fees if you want your retirement funds to grow faster. Options to save on fees include:

  1. Using a self-directed brokerage account where you can build your portfolio of stocks, ETFs, etc. If you are confident with managing your own portfolio and are willing to re-balance it as appropriate, this option is for you.
  2. Using a robo-advisor: Robo-advisors simplify the investment process, invest your assets and re-balance your portfolio automatically, all at a much lower management fee than traditional mutual funds. Check out this detailed guide to robo-advisors in Canada.
  3. Utilizing index funds: Index funds are similar to mutual funds, however, they are managed passively and charge lower fees. Here are some index fund options for beginner investors.

Wealthsimple is our top choice for robo-advisor in Canada. You get a $75 cash bonus when you open an account here.

Are RRSP Contributions Right For Me?

RRSP contributions are awesome, however, you may benefit more from first maximizing your TFSA if you are currently earning a low-income (i.e. in a low-tax bracket). With a lower marginal tax rate, your RRSP deductions will return a lower amount to you in tax refunds.

Strategies for when you’re temporarily in a low-tax bracket include:

  • Maximize your TFSA before you start making RRSP contributions. In the meantime, your RRSP contribution room will continue to grow.
  • Make RRSP contributions but do not request a tax deduction until you move into a higher tax bracket – to get more in tax refunds.

If your employer is matching your RRSP contributions in any way, you will be wise to take them on their offer and not leave free money on the table, irrespective of your tax bracket.

These are just a few of many scenarios that may present themselves. For a customized approach that works best for you, consider talking to a financial advisor.

Related Reading:

What are your plans for the 2021 RRSP season? Let us know in the comments section below!

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. His writing has been featured or quoted in the Toronto Star, The Globe and Mail, MSN Money, Financial Post, Winnipeg Free Press, CPA Canada, Credit Canada, Wealthsimple, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO and monitors his credit score for free using Borrowell.

8 thoughts on “RRSP Season 2021 – Contribution Deadline of March 1, 2021”

    • @GYM: I think the new Vanguard ETFs would be attractive to DIY investing-wannabes who find the challenge of rebalancing and juggling 3-4 ETFs too cumbersome. They now have some one-fund solutions to play around with.

      Reply
  1. Hey Enoch!

    Thanks for the shout again!

    And great article that you linked on “one-ticket solution.” It’s the best fit for those who are lazy and don’t want to do anything… including re-balancing.

    I haven’t re-balanced before. I just added onto whatever I have… I think I am lazy. YIKES!
    I should probably start holding some bonds or fixed income in the near future. I’m currently 100% equity.

    Also, you have a great post here about RRSP season. It’s that time of year again… when you mentioned about the HST/GST credit, it reminded me of my dumb and younger self. I used to get those as a student, and I remember thinking “woo-hoo! free money for some shopping.” So, I there was a time where I spent about $120 on a pair of earrings that I ended up throwing away because it rusted. 🙁 *SOBS* Those are the things my HST/GST credits went towards…

    Reply
    • @fin$avvy panda: LOL at just buying and adding. I often delay rebalancing as well and now only do it once a year, which is much easier for me to keep up with. Haha…I guess you get a pass as a student to do whatever you want…just a part of student life. I have my own share of spending money on things as a student that I would definitely avoid like the plague now.

      Reply
  2. Hi Enoch
    Thanks for the shout out !
    I was just reading moneySense about The new Vanguard ETF. I will check out Rob Carrick article. I think those ETF will be popular. Thanks for the weekend reading.

    Reply
    • Hey Steve, you are welcome. Yes, I can see these new ETFs becoming popular real fast. In general, the ETF market in Canada is expanding, but still a ways behind the market share in the U.S., I think.

      Reply
  3. I’m new to Canada, moved last year 2020. I’m I allowed to contribute to an RRSP rightaway for 2021? I know what my contributing limits for 2021 will be based on my income in 2020. Or do I have to wait till taxes are filed and assessed by CRA?

    Reply
    • @James: I think it is best to wait and see your NOA from CRA for 2020 so you don’t mistakenly over-contribute. It will be easier for you to estimate your contribution room going forward.

      Reply
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