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  Canada Immigration Forum > About Canada > Financial Planning > Question related to RRSP Unused Contribution
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Question related to RRSP Unused Contribution




Hi Guys,

I have question related to RRSP unused contribution.

Let's says someone has RRSP deduction limit $10000 on Notice of Assessment (NOA).
NOA also shows unused contribution $6000.

It means he has contributed $6K in past but never claimed against his RRSP deduction limit for tax benefit.

Do you think he can keep depositing money to RRSP account and increase the unused contribution maximum up to RRSP deduction limit? ($4K more)

He is in minimum tax bracket and doesn't want to claim for tax benefit for now. At the same time he wants make interest/growth tax free. [I know about TFSA. Consider he reached to his TFSA limit.]

Any pros/cons?

What happen after few years he wants to withdraw all unused contribution without paying tax? Do you think he can do that? Is there any time limit to withdraw unused contribution? Is there any penalty?

Please note that this is not access contribution. It is unused contribution within RRSP deduction limit.

I appreciate your quick response.

Thanks,

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meitsme

Senior Desi
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Post ID: 233886 03-02-17 14:26:58
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meitsme
Senior Desi
Member since: Feb 06




Posts: 464
Location:


Any idea on above RRSP question?

I am pretty sure it is legal and shouldn't be any issue there.

Just wondering about what other experience people are thinking about it and if there is any other better suggestion instead of contributing to unused RRSP to take tax free grow.

Thanks.

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Post ID: 233898 06-02-17 11:59:23
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meitsme
Senior Desi
Member since: Feb 06




Posts: 464
Location:


Any idea on above RRSP question?

I am pretty sure it is legal and shouldn't be any issue there.

Just wondering about what other experience people are thinking about it and if there is any other better suggestion instead of contributing to unused RRSP to take tax free grow.

Thanks.

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Success is Never Ending and Failure is Never Final.

 
Post ID: 233917 07-02-17 16:40:28
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meitsme
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Member since: Feb 06




Posts: 464
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By mistake somewhere I clicked and duplicate message posted. Not sure how to delete it.
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Post ID: 233918 07-02-17 16:43:55
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myjughead
Junior Desi
Member since: Apr 11




Posts: 11
Location: Ontario, Canada


Yes, you can contribute towards your RRSP (for tax free growth) and not claim the RRSP contribution while filing taxes.

Problem#1, is you will not get tax refund as you have not claimed RRSP contribution in your tax return. You can claim your RRSP contribution in future years when your income is higher and you will get the refund at that point.

Problem#2 is you not only loose tax refund but you will also loose tax free growth on refund amount.

Problem#3, if your income is not expected to go higher than I would say $40k in future years, then it does not make to sense to contribute towards RRSP.

Further, if the amount is contributed in RRSP and you want to withdraw, your investment dealer will keep the withholding tax from 10% to 30% depending upon how much you withdraw (CRA rules) + the amount you withdraw has to be added to you income of that year and you will have to pay tax on that as per your marginal tax rate.

Hope this helps.
Thanks,


 
Post ID: 233935 09-02-17 10:23:06
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mkannuri
Senior Desi
Member since: Nov 06




Posts: 409
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Not sure if this is off topic, but will post anyways as its still related to RRSP.

My situation is, I have never contributed to RRSP being self employed and takes under 50k household income from my corporation..

As our TFSA's got maxed out and before jumping into Un-Registered accounts, I would like to give a shot with RRSP (available room around 50k for me and 25k for wife).

I am not planning to withdraw from RRSP's until retirement where 0 income,

So my question to experts who are using RRSP vehicle...Do you guys open separate RRSP accounts (one for husband and the other for wife)
Are there any Joint RRSP accounts available, if yes how it works as both contributors rooms are different?
I heard about spousal RRSP accounts? can any one show an illustration how this can be advantageous instead of two separate independent accounts.

any other tips related to RRSP accounts for self employed before jumping into un-registered accounts?

Really appreciate any insights


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MK

 
Post ID: 235036 29-05-17 14:00:26
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sudesingh
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Member since: Jul 04




Posts: 2053
Location: Toronto


RRSP accounts are on individual names, so you and your spouse will have to open separate accounts. Each individual will have their own RRSP limit.

In your case you have a limit of $50K while your spouse has a limit of $25K. Let's consider the situation where the wife is not working and does not have a limit at all. So all the contribution is under your name while the wife is taking care of the kids and does not have an opportunity to work, or works only part-time and as a smaller contribution limit.

How about being a bit (probably more than a bit) generous and open a spousal account. The spousal account is held in your wife's name, which means she has exclusive access to the funds, but you are the contributor, which means all deposits that you make will go towards your contribution limit BUT you don't have any access to the funds. Only your wife can operate that account. The only advantage you have is that in your current year tax returns you get the benefit of the RRSP contribution. The other soft advantage is both of you could land up a equal or almost equal amount in your respective RRSP accounts, which may be beneficial from a taxation perspective post-retirement when you start withdrawing.

Hope that helps...

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Post ID: 235038 29-05-17 16:06:30
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mkannuri
Senior Desi
Member since: Nov 06




Posts: 409
Location:


Quote:
Originally posted by sudesingh

RRSP accounts are on individual names, so you and your spouse will have to open separate accounts. Each individual will have their own RRSP limit.

In your case you have a limit of $50K while your spouse has a limit of $25K. Let's consider the situation where the wife is not working and does not have a limit at all. So all the contribution is under your name while the wife is taking care of the kids and does not have an opportunity to work, or works only part-time and as a smaller contribution limit.

How about being a bit (probably more than a bit) generous and open a spousal account. The spousal account is held in your wife's name, which means she has exclusive access to the funds, but you are the contributor, which means all deposits that you make will go towards your contribution limit BUT you don't have any access to the funds. Only your wife can operate that account. The only advantage you have is that in your current year tax returns you get the benefit of the RRSP contribution. The other soft advantage is both of you could land up a equal or almost equal amount in your respective RRSP accounts, which may be beneficial from a taxation perspective post-retirement when you start withdrawing.

Hope that helps...


Thanks Sudesingh,
I am still struggling to understand the CRA terminologies and rules (Unused deductions, additional deductions limit, unused contributions etc.,),
But I am slowly reaching there...
I have few more questions bit in detail..will send a PM in the evening after do some more research on my part.
rgds
MK



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Post ID: 235040 29-05-17 17:53:03
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