Financial advisory from Demo.
Vice President
TD Wealth Management___
Planning Ahead
Are You Nearing the Age of 71 ?
If you are nearing the age of 71, don’t forget that you will need to wind up your registered Retirement Savings Plan (RSP) by December 31 1st of the year in which you turn 71. Remember to plan ahead as there are a variety of tax-deferral opportunities that may be considered. As always, please seek the advice of a tax professional regarding your specific situation.
Consider your options. There are three maturity options that can be used on their own or in combination:
i) transfer funds to a registered Retirement Income Fund (RIF);
ii) distribute funds as income; or
iii) purchase an annuity.
Many factors will impact which option is best for you, and we can help you to carefully consider the options as they apply to your situation.
Still working at age 71? Since RSP contribution room is based on your previous year’s earned income, if you are still working at age 71, you may be creating RSP contribution room for the following year. If you have already contributed the maximum amount for the current year (based on your previous year’s earned income), there may be an opportunity to contribute an additional amount (based on the current year’s earned income) at the end of the year. The additional contribution (in excess of the $2,000 lifetime over-contribution amount, if available) will be subject to a penalty of 1 percent per month. (You will need to file form T1-OVP with the Canada Revenue Agency and pay this penalty within 90 days from the year end.)
However, in January of the next year, this contribution may no longer be considered to be an over-contribution. Where this is the case, the penalty-may apply for one month (if the over-contribution was made in December), but may be offset by tax-deferred growth from the extra contribution if it remains invested in a registered plan such as an RIF.
Working past the age of 71? If you have a younger spouse/common-law partner, income earned in the year you turn 71 and beyond may allow you to make a spousal RSP contribution until the end of the year that your spouse turns 71. This can be made by the regular RSP deadline. Be aware – after age 71, RSP contribution room information will not be shown on your Notice of Assessment, so you will need to calculate this on your own.
