New Year, New Financial You!
Benefits of the RRSP
Many of us have resolved to improve our financial hygiene in 2022. An excellent way to clean up on a large income tax return is by investing in a Registered Retirement Savings Plan (RRSP). RRSPs are tax-deferred, which means that any money you contribute will be exempt from Canada Revenue Agency (CRA) taxes the year you make the deposit. You will not be taxed until you make withdrawals. Thus, RRSPs are a great mechanism to reduce a current-year tax bill.
Because tax-deferred does not mean tax-free, you will eventually have to pay taxes when you withdraw your money later in retirement. By the time you do so, your income will almost certainly be less, and your tax rate will be lower.
Check Your Contribution Room—You May Have More Than You Think!
• Canadians can contribute 18 per cent of their salaries to a maximum of $29,210 (for 2022) and$27,830 (for 2021) to RRSPs.
• Canadians with pension plans, such as Alberta teachers, have an amount called the pension adjustment (PA) that is deducted from the RRSP contribution limit.
• The PA is the estimated value of the pension benefits a person has earned during the year and is deducted from their RRSP room.
• CRA established the PA to level the playing field for pensioned and nonpensioned Canadians alike. The higher the value of your pension, the higher your PA amount will be.
• Your PA amount can be found in Box 52 of your T4 (Statement of Remuneration Paid). Most teachers have between $2,000 and $3,000 RRSP room after the PA is deducted.
How the ATA Group RRSP Payroll Deduction Works
• Your RRSP contribution is taken off your paycheque by your employer BEFORE taxes. You are then taxed on the remainder of your pay.
• Immediate Tax Savings means that you receive your tax “refund” on that same paycheque.
• Your investment grows in the background, often without you even noticing!
• A group RRSP gives you access to a wide range of investment options, and the ATA Group RRSP (administered by Capital Estate Planning) has a very competitive fee structure.
Your Spouse or Partner Has Access Too, Personally or Through a Spousal Plan!
• It is always a good idea to look at both yours and your spouse’s/partner’s bigger picture: combined income and retirement savings plans when planning for your financial future.
• To set up a Spousal Group RRSP: download, print and fill out the ATA Group RRSP application form and the Spousal RRSP Contribution Details form (this form indicates the source of contributions in a spousal plan). (See link below.)
March 1, 2022 is the deadline for contributing to an RRSP for the 2021 tax year. The ATA Group RRSP features no front-end, set-up, redemption or commission fees. www.capitalplanning.ca/ata-members/investments/ata-registered-retirement-savings-plan