CapriCMW's Group Retirement and Savings Advisors address some of the most common questions from employees about the Group RRSPs offered by their employers.
WHAT IS A RRSP CONTRIBUTION AND WHAT ARE THE TAX BENEFITS ASSOCIATED WITH IT?
A Registered Retirement Savings Plan (RRSP) is a savings plan that you can contribute funds to for retirement purposes. RRSP contributions offer the benefit of reducing your taxable income.
CAN I CONTRIBUTE MORE THAN MY EMPLOYER WILL MATCH?
Yes, the amount over the % to be matched is called your Voluntary Contribution. However, it is your responsibility to remain under your CRA contribution limit (found on your Notice of Assessment).
WHAT HAPPENS IF I CONTRIBUTE MORE THAN MY CRA CONTRIBUTION LIMIT?
If you do go over your CRA contribution limit, you can expect to pay a tax of 1% per month on any excess contributions. For more details, please visit: What happens if you go over your RRSP deduction limit? - Canada.ca.
WHAT ARE VOLUNTARY CONTRIBUTIONS?
Voluntary contributions to group RRSPs are additional contributions made by you to your RRSP account above the amount being matched by your employer.
CAN I PULL MY MONEY OUT OF THE RRSP WHEN I LEAVE, OR MERGE IT WITH ANOTHER RRSP THAT I HOLD?
Yes! When you leave, you will receive a Conversion Package that will give you three options:
- Leave your RRSP with the current provider and move to a personal plan.
- Transfer it to another registered retirement account.
- Cash it out (note that you will be taxed on the amount cashed as if it were regular income).
CAN I TRANSFER MY RRSP TO ANOTHER PLAN THAT I HOLD WHILE I AM STILL WITH MY CURRENT EMPLOYER?
- Withdrawals and transfers are not permitted for your regular/employer contributions while you are still with your current employer, while on disability leave or maternity/paternity leave.
- Withdrawals are permitted for participation in the Home Buyers Plan or the Lifelong Learning Plan.
- Withdrawals of your voluntary contribution are always permitted.
WHERE COMPANY MATCHING IS BASED ON YEARS OF SERVICE, IF I AM NEARING THE NEXT LEVEL OF COMPANY MATCHING, CAN I BUMP UP TO THE NEXT LEVEL EARLY?
You can increase your contributions at any time, but you must wait until you have been with your employer for the prescribed amount of time before they will increase the percentage that will be matched.
HOW CAN I DETERMINE MY ANNUAL RRSP CONTRIBUTION LIMIT?
This amount can be found on your most recent Notice of Assessment (NOA) sent to you by the CRA.
ARE THERE BENEFITS TO CONSOLIDATING ALL OF MY RRSPS INTO ONE ACCOUNT?
- You will pay lower Investment Management Fees.
- Consolidating enables simplified tracking of all your investments.
- When all in one place, it is easier to assess how your investments match your goals (and make changes as necessary).
- Coordinating your RRSP contributions with future withdrawals, and identifying where you can leverage tax advantages, becomes much less complicated.
CAN I TAKE FUNDS OUT IF I NEED THEM?
- Employer/Employee Regular Contributions can only be withdrawn for the Home Buyers Plan and the Lifelong Learning Plan.
- Voluntary Contributions can be withdrawn at anytime.
Your CapriCMW Group Retirement and Pension Specialists are here to help with short and long-term strategies around the structure of your employee retirement and savings programs.