RRSP Contribution Deadline: Why I Only Care About the RRSP Contribution Limit

I have a personal finance blogger confession.  I don’t really care about the RRSP contribution deadline.  I know it is in March…I know that the banks are usually insanely busy at this time of year because they are usually receiving money from their customers for their high MER mutual funds sold by the mutual fund lady at the big bank, but I don’t let that dictate when I contribute to my RRSP.

Even though I don’t really pay heed to when the contribution deadline is, I do pay attention to the RRSP contribution limit because it affects my taxes— contributions made in the early part of the year (e.g. before March 1 2019) will count towards the previous year.

When is the RRSP Contribution Deadline?

The contribution deadline for the previous tax year (for example, this is the year 2019, and the RRSP contribution deadline for 2018 taxes) is the after the first 60 days of the following calendar year.

So, for 2021, the RRSP contribution deadline is March 1, 2021 to make sure that your RRSP contribution will be included in your 2020 taxes.

It does vary from year to year.  Some years it was February 28.  Some years it was February 29.  Some years it was March 1.  It is always around the same time (approximately).  It is usually after the first 60 days of the current year.

If you have trouble remember this date for 2020 taxes, just remember, the RRSP contribution deadline is the same date as Justin Bieber’s birthday.  You won’t un-forget it.

Why Do I Not Care About the RRSP Contribution Deadline?

Don’t get me wrong, I used to care about the RRSP deadline, back when I first started to contribute to my RRSP.

Every time I walked past a bank, I would see advertisements about contributing to your RRSP and to make sure you get your RRSP contribution in before the deadline.  I would hear advertisements on the radio about contributing to your RRSP before the deadline.  Finally, I would see ads on TV (back when I had cable) to contribute before the RRSP deadline.  I never noticed these advertisements at any other time of year, so I naively thought that this is the only time you can contribute to your RRSP to make it count for taxes for the previous year- sometime from January to March 1.

I eventually learned that you can contribute to your RRSP throughout the year and you don’t need wait until the following year to contribute.  Because I have a defined benefit pension I have a reduced RRSP contribution limit so I am cautious about contributing too much to my RRSP.  It’s already maxed out (easy to max out though, because it is markedly reduced compared to someone who does not have a defined benefit pension).

It’s a bit confusing to figure out how much to contribute, but I contribute a small amount (usually about half of what I think will be my contribution limit) and then put in the rest, usually in al lump sum amount, when I get my Notice of Assessment from the government in the mail (or online through the Canada Revenue Agency My Account), sometime after my taxes are filed (usually in May or June).

How I Contribute to my RRSP

The first 60 days of the current year can be used for the previous year’s taxes.

Though it is best to contribute earlier so that you can take advantage of the RRSP’s tax shelter capabilities for the year.

Let’s say my RRSP contribution limit from the previous year was $3500 (it is usually low because of the pension adjustment) and that there wasn’t much change in earnings from the previous tax year to the current tax year.

I would then take around $200 per month ($200 x 12= $2400) and then dollar cost average this $200 per month into my RRSP investment account through the TD e-series funds.  Then, I would wait until my taxes are done and I get my Notice of Assessment in to figure out the max contribution limit and how much more money I would need to put into my RRSP investment account.

With the remaining amount (let’s say it is exactly $1100), I contribute this remaining amount to my RRSP sometime in the middle of the year.

Related Post:  Dollar Cost Average and Dividends Approach:  Investing in Moderation

What is the RRSP Contribution Limit?

Generally, the RRSP Contribution Limit is 18% of your earned income for the previous year- up to a maximum of around $25,000 per year.

Year	RRSP Maximum Dollar Limit
2020	$27,230
2019	$26,500
2018	$26,230
2017	$26,010
2016	$25,370
2015	$24,930
2014	$24,270

The Government of Canada has a website that tells you how much your deduction limit is.  Here’s where to find your RRSP deduction limit- usually you can see it the Notice of Assessment Area on CRA’s My Account.  It’s easy to set up an account and you can even do it using your banking information- as a ‘sign in partner’.

Related Post: Investing in an RRSP: Contribution Room and How to Use the RRSP

So if I don’t care too much about the RRSP contribution deadline, why do I care about the RRSP contribution limit?

I care about the contribution limit because I don’t want to over contribute in my RRSP.  Over contributing results in penalties.

However, contributing to your RRSP has the benefits, including increasing your Canada Child Tax benefit payments.

You have to be careful if you over contribute. If you over contribute by more than $2000 to your RRSP, you will have to pay taxes on the over contribution. It is 1% per month on the excess amounts (similar to TFSA over-contribution), and the government likely won’t tell you that you over contributed for months to even a year. 

I found this out the hard way when I accidentally over contributed to my TFSA when it first rolled out.  Thankfully, they reversed the charges as it was a common incidence back then, but the penalty was almost $500 from what I recall.  It took a lot of phone calls and waiting on hold for someone to talk to me (e.g. a ton of hassle) but it was a good lesson learned.

Here’s how I fixed my TFSA over contribution.

Do you usually contribute in a lump sum before the RRSP Deadline? 

Or do you contribute a regular amount before the RRSP Contribution Deadline strikes?