Rrsp Calculator Ontario 2019
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Reviewed by Calculator Editorial Team
An RRSP (Registered Retirement Savings Plan) is a tax-advantaged investment account available to Canadian residents. This calculator helps you determine your RRSP contribution limits and potential tax savings for 2019 in Ontario.
What is an RRSP?
An RRSP is a retirement savings vehicle offered by the Canada Revenue Agency (CRA) that allows you to defer income taxes on contributions and investment earnings. The funds grow tax-free until withdrawal, when they're taxed as income.
RRSPs are popular among Canadians because they offer tax-deferred growth and can be used to supplement other retirement income sources like CPP and OAS.
How an RRSP Works
The basic process of using an RRSP is straightforward:
- Open an RRSP account with a financial institution
- Make contributions (either through payroll deductions or direct deposits)
- Invest the funds in various assets (stocks, bonds, mutual funds, etc.)
- Let the investments grow tax-free
- Withdraw funds in retirement, paying income tax on the withdrawals
RRSPs are different from TFSA (Tax-Free Savings Accounts) in that RRSP contributions are tax-deductible, while TFSA contributions are not. However, withdrawals from an RRSP are taxed as income, while TFSA withdrawals are tax-free.
RRSP Contribution Limits
For 2019, the maximum RRSP contribution limit was $27,000. This limit applies to both employer and employee contributions combined.
In Ontario, you can contribute up to your earned income, up to the maximum limit. The contribution room is calculated as:
RRSP Contribution Room = RRSP Limit - Previous Year's Contributions - Current Year's Contributions
For example, if you contributed $10,000 in 2018 and $5,000 in 2019, your contribution room for 2019 would be $27,000 - $10,000 - $5,000 = $12,000.
Tax Benefits of RRSPs
The primary tax benefit of an RRSP is that contributions are tax-deductible. This means you can reduce your taxable income by the amount you contribute, potentially lowering your tax bill.
Additionally, investment earnings within the RRSP grow tax-free. When you withdraw the funds in retirement, you pay income tax on the withdrawals, but you've already paid tax on the contributions.
| Tax Year | RRSP Contribution Limit | Maximum Tax Deduction |
|---|---|---|
| 2019 | $27,000 | $27,000 |
| 2018 | $26,000 | $26,000 |
| 2017 | $25,000 | $25,000 |
RRSP Withdrawal Rules
Withdrawals from an RRSP are subject to specific rules:
- Minimum withdrawals must begin by April 1 of the year you turn 71
- Withdrawals must continue until you turn 72
- You can withdraw up to your contribution room plus earnings in any given year
- Withdrawals are taxed as income in the year they occur
If you withdraw more than your contribution room, the excess is taxed at your marginal tax rate. This is called the "taxable withdrawal" amount.
Example Calculation
Let's say you have $10,000 in your RRSP from previous years and want to contribute $15,000 in 2019. Here's how the calculation works:
- Your RRSP limit for 2019 is $27,000
- Subtract your previous contributions: $27,000 - $10,000 = $17,000
- Your remaining contribution room is $17,000
- You can contribute up to $15,000 (your earned income)
- Your tax deduction is $15,000
After 20 years of growth, if your RRSP is worth $200,000, you could withdraw $15,000 (your contribution room) tax-free, and the remaining $185,000 would be taxed as income when withdrawn.