Extra Benefits of RRSP contributions

Posted 12 Mar 2019 by Natalie LeBlanc


One of the primary benefits of making RRSP contributions, other than the obvious savings for your retirement, is that contributions are deducted from your gross income for the year. Lower income means lower taxes payable in that year (hello, tax refund!), but it also means enhanced benefits from other income-tested government programs.

Increased Canada Child Benefit (CCB)

If you have children, this may apply to you! One of the most widely-used benefit programs that is based on your income is your monthly CCB payment. Let’s assume you have 2 children (7 and 9) and your combined income with your spouse is $130,000. Your estimated benefit would be $2,736 per year.

If you made a $10,000 RRSP contribution, that benefit increases to $3,306.24! That’s $570 more per year, just for saving for retirement via an RRSP.1

Higher Education Savings Grants

Saving for your child’s education could also be made easier by lowering your income, especially if you’re a single parent or couple that is close to the threshold of qualifying for the Canada Learning Bond (CLB) and Additional Canada Educations Savings Grants (CESG).

Additional CESG of 20% is available if your income is lower than $45,916, or an additional 10% if your income is lower than $91,831.2 The CLB is also available depending on the number of kids you have; for less than three kids the threshold is only $46,605.If your family income is just above any of those thresholds, an RRSP contribution could be the deciding factor to qualifying for more government grants.

Higher Disability Savings Grants

If you qualify for the Disability Tax Credit (DTC), another grant program that uses your income to determine your grant level is for Registered Disability Savings Plans (RDSPs). If your income is less than $93,208, you can receive up to 300% of your RDSP contributions back in government grants!4

A related program, the Canada Disability Savings Bond is a similar grant available to RDSP owners. If your income is less than $46,605, you qualify to annually receive up to $1,000 from the government. Again, if your income is just above one of these thresholds, an RRSP contribution might pay off more than you think!

RRSP contributions can be more than just retirement savings

All of these potential extra dollars in your accounts are on top of the fact you’ve now just put away a few dollars for your retirement. Talk to your financial advisor about the possibility of reaping these rewards following your RRSP contributions this year.

 

1 https://www.canada.ca/en/revenue-agency/services/child-family-benefits/child-family-benefits-calculator.html

2 https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-education-savings-grant-cesg.html

3 https://www.canada.ca/en/employment-social-development/services/learning-bond/eligibility.html

4 https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-disability-savings-plan-rdsp/canada-disability-savings-grant-canada-disability-savings-bond.html