RRSP Myths #3 & #4

There are a couple of myths on the age front so I’ll cover those together. First there’s the idea that you have to be over 19 to contribute to an RRSP. This misunderstanding came about because people under the age of 19 aren’t allowed to make an over-contribution to their RRSPs.



Online only.


However, anyone in Canada who has earned income and has filed a tax return, regardless of age, has RRSP contribution room. That includes kids with a paper-route, those who baby-sit, and children who have promising modeling or television careers.

Even if there’s little point in a kid claiming the RRSP deduction because she owes little or no tax, the benefits of contributing to an RRSP makes the exercise worthwhile. First there’s the magic of compounding return. A single RRSP contribution of $500 at age 15 compounding at an average return of 5% will grow to more than $5,700 by 65.

That’s not so much money Gail! No? Well it’s $5,200 she didn’t have to earn, so how can it not be worthwhile?

The second benefit is that since a child’s RRSP tax deduction can be carried forward indefinitely, when she does start working full time, she’ll have deductions she can use to offset the tax on her income.

The other age-related myth is that if you’re over 71 you’re out of the RRSP business. Once you turn 71 you can no longer make contributions to an RRSP. If you happen to still be generating earned income, too bad! You’re out of luck. Maybe not.

If you’re turning 71 but will continue to have earned income, whether from rental property, a professional practice or business ownership, there’s a way to get a deduction in the year you turn 72, even if you’re not allowed to make an RRSP contribution. In early December of your last year of contribution, make an additional contribution based on your earned income for that year.

Yes, that’s technically an over-contribution. And yes, if it’s over the $2,000 lifetime limit, you’ll start incurring the one-percent-per-month fee. But that’ll only happen until the calendar clicks over to the new year, so that means only one month’s worth of penalty. Now, even though you’re not allowed to make a contribution, you can claim the deduction for the contribution that you made last year. This could also help reduce your exposure to the OAS clawback by reducing your taxable income. Just remember not to get greedy. Don’t reduce your income to such a low point that you bring the alternative minimum tax into effect.

Also keep in mind that contributions to a spousal RRSP are based on your partner’s age. So even if you are an old geezer, as long as your partner is under 71 you can contribute on his or her behalf and grab a deduction.

63 comments on “RRSP Myths #3 & #4

  1. C. Sheen has always been this sort of a fool. Get real, any of us truly surprised with his actions? At this point, you would probably think we all would come to count on so much.


  2. Virtual dj has saved me alot of money in the long run. I now dont have to spend alot of money on vinyl records. yay


  3. I really don’t typically comment on blogs, however I wanted to tell you the articles are actually spot on and put together very well. I work via the internet as a article writer. During my free time, I look over personal blogs to get insight and ideas. You know, I basically get paid for writing content of this nature. I’m 100% employed online, and earn way more now then when I was working my previous incredibly dull job. Regardless, the organization I produce for will be hiring more freelancers. I believe you’d be superb at it. Details here


  4. Not professional unfortunately. What you say is approximate and not necessarily true; let us? as marketers not discourage anyone’s ambition to be the next yahoo etc. If everyone thought I CAN’T DO IT BECAUSE SOMEONE ELSE DID IT we’d be deep in ****. So thanks for sharing but here’s my opinion.


  5. i’m adding your blog rss feed so that i can see your new posts. keep up the good work!


  6. i thought this was a really great post to read. i’ll check back for new posts by you!


  7. I must say i appreciate many of your articles, could i take part of your articles to my own blog page? thanks a lot.


  8. My partner and I stumbled over here by a different web page and thought I may as well check things out. I like what I see so now i am following you. Look forward to looking into your web page for a second time.


  9. i thought this was a really great post to read. i’ll check back for new posts by you!


  10. Pingback: Blog Hosting

  11. i’m adding your blog rss feed so that i can see your new posts. keep up the good work!


  12. i’m adding your blog rss feed so that i can see your new posts. keep up the good work!


  13. Pingback: Check out my FB profile

  14. Pingback: Black Fridy Ads

  15. Pingback: Sweaters Sale

  16. Pingback: poly mva

  17. Pingback: Spine Institution

  18. Pingback: microwave ovens news

  19. Pingback: natural haircolor tips

  20. Pingback: fibroid symptoms|symptoms of fibroids

  21. Pingback: Drug Detox

  22. Pingback: The Bathroom Scales

  23. Pingback: Snow Cone Syrup

  24. Pingback: The Hairloss Treatment

  25. Pingback: Water kettles

  26. Pingback: Scrap Gold Parties

  27. Pingback: Bungalow Ile Maurice

  28. Pingback: Electronic cigarette Review

  29. Pingback: Christmas Gift Ideas For Men

  30. Pingback: Website traffic

  31. Pingback: Zune phone

  32. Pingback: Cyber Monday

  33. Pingback: Mauritius Self Catering Holidays

  34. Pingback: Asthma

  35. Pingback: roof repair los angeles

  36. Pingback: PS3 Release Dates

  37. Pingback: ways to make money online

  38. Pingback: Wooden Dog House

  39. Pingback: direct loan consolidation

  40. Pingback: how to make money online

  41. Pingback: Associate Degrees Online

  42. Pingback: My Blog Title

  43. Pingback: cheap hotel deals

  44. Pingback: roofing contractors kansas city

  45. Pingback: roofing contractor los angeles

  46. Pingback: roofers atlanta

  47. Pingback: replacement windows houston tx

  48. Pingback: Location Villa Ile Maurice

  49. Pingback: Online Dating Sites

  50. Pingback: Whole Life Insurance Rates

  51. Pingback: Self Catering Mauritius

  52. Pingback: Wii Release Dates

  53. Pingback: Cheap Car Insurance Quotes Online

  54. Pingback: Personal Secured Loans

  55. Pingback: Lanyards

Leave a comment

Your email address will not be published. Required fields are marked *