# I've caught up!



## jamesbe (May 8, 2010)

Today is the day which I have officially caught up on my RRSP contributions and have no more backlog! 

Next on the list is TFSA, I have 5K in with another $10k to put in before years end.

After that it is money on the mortgage!


----------



## the-royal-mail (Dec 11, 2009)

Excellent. Not many people have maxed out their RRSPs. Mine may never be. That has always been difficult and now the TFSA appeals to me so much more so the money goes there now instead. Much more flexible. Congratulations!


----------



## Four Pillars (Apr 5, 2009)

Awesome!

I will be almost caught up once I do all my 2011 contributions. 2012 will be my catchup year.


----------



## jamesbe (May 8, 2010)

It wasn't easy I put $32k in each year for the past 4 years!

Next year I'll just have to put in my 18% and continue the trend. Which means I should have some extra spending ... or investing money around.


----------



## Four Pillars (Apr 5, 2009)

Interesting - $32k/year for the last 4 years is pretty much exactly what I've done as well.

The RRSP contribution limits are pretty high (unless you are a very high earner) - if you don't meet or come fairly close to the limits for a few years, it's easy to build up a big chunk of contribution room.


----------



## Ihatetaxes (May 5, 2010)

Congratulations!

I'm shaking my head at this years max, $22,450. How did they come up with the 450 and not at least round up to the half k mark?


----------



## the-royal-mail (Dec 11, 2009)

^ Isn't it based upon 18% of your income for the year? Income is rarely a nice even round number. This is basic math.


----------



## Ihatetaxes (May 5, 2010)

the-royal-mail said:


> ^ Isn't it based upon 18% of your income for the year? Income is rarely a nice even round number. This is basic math.


No that is the max max for 2011. Apparently now its "indexed to average wage growth" whatever that means. If it was 18% of income my limit would be a lot higher (and it should be).


----------



## HaroldCrump (Jun 10, 2009)

There is a max limit as well.
So it's 18% of income OR Max Limit, whichever is lower.


----------



## KaeJS (Sep 28, 2010)

jamesbe said:


> Today is the day which I have officially caught up on my RRSP contributions and have no more backlog!
> 
> Next on the list is TFSA, I have 5K in with another $10k to put in before years end.
> 
> After that it is money on the mortgage!


Um. What?

Shouldn't you pay down your mortgage faster if you can?

What's the point stashing money away in your TFSA if you're paying x% on your mortgage? Unless your mortgage is like 3% and you think you can get better with investments in your TFSA, then I understand.

But if your mortgage is like 5%... I would just pay down the mortgage...


----------



## Sherlock (Apr 18, 2010)

What is meant by "RRSP deduction limit for 2011", is that how much I may contribute in 2011?


----------



## HaroldCrump (Jun 10, 2009)

Sherlock said:


> What is meant by "RRSP deduction limit for 2011", is that how much I may contribute in 2011?


In 2011 you may contribute your 2011 limit + any accumulated room from previous years.
If you are "caught up" as Mr. Jamesbe is, then the 2011 limit is your total limit.


----------



## cannew (Jun 19, 2011)

There are good dividend stocks paying 4%-5%, even better if you buy during a market downturn. Valuation is everything.

By investing in your TFSA you will grow your pile tax free and by re-investing the dividends you will compound the growth.

Always refer to your Rev Can Assessment report to determine how much you still have on your RRSP. Adding more than allowed will cost you.


----------



## Sherlock (Apr 18, 2010)

HaroldCrump said:


> In 2011 you may contribute your 2011 limit + any accumulated room from previous years.
> If you are "caught up" as Mr. Jamesbe is, then the 2011 limit is your total limit.


But isn't my 2011 limit based on how much I will earn in 2011? So how can they tell me what my 2011 limit is when 2011 isn't over yet? I logged on to the CRA website and it told me what my limit for 2011 is.


----------



## KaeJS (Sep 28, 2010)

No. Your 2011 limit is 18% of the income you earned (claimed) in 2010, + any rolled over amounts from previous years.

RRSP's always work one year behind.

Next year, your 2012 limit (also called contribution room) will be 18% of everything you earned (claimed) in 2011, plus any room you didn't use up in 2011.

And of course, there is that maximum that you cannot go over. Unless you make more than $120k/year, you don't need to worry about hitting the maximum.

Edit:

Example -

Sherlock earns $50,000 in 2010.
50,000 x 0.18 = $9,000.
Sherlock's 2011 limit would be $9,000

Let's say Sherlock Deposits only $7,000 to his RRSP in 2011.

Now, in 2011 Sherlock earns $55,000 cause he got a raise.
$55,000 x 0.18 = $9,900
Sherlock's 2012 Limit would be $9,900 + ($9,000 - $7,000) = $11,900.

Let's say Sherlock Deposits $12,000 (which is $100 over) to his RRSP in 2012.

Now, in 2012 Sherlock earns $55,000 again (no raise this year, sucka!)
$55,000 x 0.18 = $9,900
Sherlock's 2013 Limit would be $9,900 + ($11,900 - $12,000) = $9,800

Sherlock Deposits $9,800 into his RRSP in 2013, and he is Caught Up.
Sherlock is not over, nor under. He is spot on.


----------



## I'm Howard (Oct 13, 2010)

You can defer paying taxes into the future, but you may be deferring into a time when you may actually pay more taxes than you save.

I know several people, now in their 80's, sitting on six figure RRIF's, when they pass on, this lump sum will be taxed .

I am not saying don't save for the future, but you cannot buy back the enjoyment of youth, don't be so focussed upon Retirement that when the day arrives, you have the funds, but neither the partner nor the energy to enjoy it.

RRSP's also do not allow you to claim Capital Losses nor get favourable tax treatment for Dividends.


----------



## jamesbe (May 8, 2010)

KaeJS said:


> Um. What?
> 
> Shouldn't you pay down your mortgage faster if you can?
> 
> ...


My Interest rate on my Mortgage is 2.15%


----------



## Syph007 (May 2, 2011)

Congrats! I have 90k of room still to contribute...


----------



## andrewf (Mar 1, 2010)

I'm Howard said:


> You can defer paying taxes into the future, but you may be deferring into a time when you may actually pay more taxes than you save.
> 
> I know several people, now in their 80's, sitting on six figure RRIF's, when they pass on, this lump sum will be taxed .
> 
> ...


A better strategy for people in this situation would be to annuitize some or all of their RRIF and invest their non-registered assets in a way that is more conducive to bequeathing (if that is their goal). An added bonus is that it can be invested more aggressively if it is not needed for retirement income.


----------



## the-royal-mail (Dec 11, 2009)

I don't think I'll ever catch up. tier3 is really difficult to save for in my household. I've got what amounts to pocket change in there now. Kudos to anyone who can manage to max this out.


----------



## KaeJS (Sep 28, 2010)

jamesbe said:


> My Interest rate on my Mortgage is 2.15%


well, then by all means!


----------



## Karen (Jul 24, 2010)

> A better strategy for people in this situation would be to annuitize some or all of their RRIF and invest their non-registered assets in a way that is more conducive to bequeathing (if that is their goal). An added bonus is that it can be invested more aggressively if it is not needed for retirement income.


Andrew, I wonder if you would explain your reasoning about the above comment for me. I'm trying to understand why you think it would be better to annuitize RRIF money if it's not going to be needed for living expenses. I'm in a somewhat similar situation where I don't expect to need the money that's in my RRSP, unless I live a very long life, which is unlikely due to some serious heart problems. I realize that I'll have to convert the retirement fund to a RRIF in a few years, but I had planned to take the minimum possible amount from it to save paying income tax on it while I'm alive and also to retain as much as possible of my OAS. Yes, my estate will have to pay the taxes on it when I die, but it's too late for me to get ahead of the game by withdrawing from my RRSP before I turned 65, so why am I not just as well off to leave as much as possible in my RRSP/RRIF for as long as I can? If I use it to buy an annuity (which will end at my death), it will give me taxable income that I don't need, and it will deprive my daughters of a couple of hundred thousand dollars that will be left after the income tax is paid on it. Am I missing something important in my reasoning?

In my case, it wasn't lack of knowledge that caused me to build up an RRSP that was more than I would need; according to all my planning, it was the sensible thing to do, but what was it Robbie Burns had to say about the best laid plans of mice and men...? My circumstances changed a few years ago when I remarried at 63 and was left with a higher-than-planned-for monthly income when my husband died. Another unplanned for factor is that some mineral claims that had been retained by my grandparents when they sold their farm in Alberta and were left to my brother and me on our parents' death, unexpectedly started producing natural gas four years ago, and we have been receiving royalty payments ever since. All that could not have been foreseen, thus my unneeded RRSP funds!


----------



## kcowan (Jul 1, 2010)

Karen said:


> ...My circumstances changed a few years ago when I remarried at 63 and was left with a higher-than-planned-for monthly income when my husband died. Another unplanned for factor is that some mineral claims that had been retained by my grandparents when they sold their farm in Alberta and were left to my brother and me on our parents' death, unexpectedly started producing natural gas four years ago, and we have been receiving royalty payments ever since. All that could not have been foreseen, thus my unneeded RRSP funds!


At least you have a plan and can quickly determine what the impact will be. That makes it easier to make informed decisions.


----------



## Sustainable PF (Nov 5, 2010)

We really need to catch up ...


----------



## Four Pillars (Apr 5, 2009)

@Karen - I think Andrewf was referring to the scenario where someone has a big RRIF and isn't making any withdrawals. He is suggesting annuitization as a convenient way to get income from this money. 

You could also just start making withdrawals from the RRIF.

The idea is to soften the tax blow a bit by spreading out the withdrawals rather than have one big hit when you die.

In your case, it doesn't sound like making early RRIF withdrawals will accomplish anything since you have other income plus you qualify for OAS.


----------



## Larry6417 (Jan 27, 2010)

MoneyGal wrote a great book about this sort of problem (_Pensionize Your Nest Egg_). One of the ratios discussed in the book is the Wealth-to-Needs ratio (your needed annual spending divided into your total nest egg). If your ratio is high (because of low spending, large nest egg, or both) then the probability of running out of money is low. 

However, an annuity can still make sense even with a large nest egg. After about age 70, mortality credits can enhance the return and make an annuity far more lucrative than fixed income. Also, some annuities can provide a return to heirs (at the cost of lower payouts). Some advise RRSP "melt down" strategies to withdraw money in low tax years. Once you start a RRIF, you're locked into a withdrawal schedule. If you live to a ripe old age, you may be withdrawing far more money than you want to. Many people will compromise and annuitize only a portion of their RRSP. They still have direct control over a RRIF + the security of an annuity. You've done so well that you have choices.


----------



## 72camaross (Apr 26, 2010)

I hope I get to see the day I max out any one of my years contribution room let alone be caught up!!!!

Congrats to you!


----------



## Karen (Jul 24, 2010)

Thanks for your comments, Kcowan, Four Pillars, and Larry. I assume now that Andrew's suggestion was a general one that doesn't necessarily apply to everyone, including me.

Larry, I did read MoneyGal's book and found it very helpful. Before I read it, I had a general feeling that I won't have to worry about my finances in the future, but the book helped me to be assured of that and to define exactly why I felt that way. To someone like me, who has a need to be able to rationalize my decisions (maybe even to the point of being a bit obsessive!), that was very important.


----------



## jamesbe (May 8, 2010)

Crisis avoided, continue on...


----------



## jamesbe (May 8, 2010)

Alright now I've caught up with my TFSA and my other half has caught up with her TFSA!

Now what? LOL I wish there was more room in our TFSA's I guess Jan isn't too far away for another $5k.

Can I shelter my money in my wife's RRSP? I think I can but I get no tax benefit... except of course savings on capital gains. Is this correct?


----------



## cannon_fodder (Apr 3, 2009)

If your wife has a spousal RRSP setup, then you can contribute into her RRSP and you still get to declare the contribution on your return. Call it an anniversary gift...


----------



## Plugging Along (Jan 3, 2011)

How romantic


----------



## jamesbe (May 8, 2010)

I'm FULL up though. I have ZERO room in my RRSP, I already contribute to a "spousal"

But what we do not have is the other scenario. She has no RRSP of her own, IE, she has never contributed and has some room left over.

She is not working though. So can I "gift" her the money and she puts it in her RRSP?

I would get no tax benefit from this I don't think, I don't believe she would either since she has no income to claim it against, although maybe she can hold onto it for future when she gets a job... hopefully.... grrrr.

Is there not a benefit from sheltering from capital gains etc? Or I am better off to just invest this non-registered?


----------



## jamesbe (May 8, 2010)

^ Or maybe I can't do this because of the attribution laws? 

I just went through a hole rig-ama-roll to get money in TFSA this way to avoid attribution (we sold our house I took the proceeds in my account, moved it to a joint and put it in her TFSA). I should have given it to her in the first place -- but at least I have a good story.


----------



## Ihatetaxes (May 5, 2010)

I'm in the same boat, both our RRSPs are maxed and now TFSA are too. RESP is maxed for both kids and we paid the mortgage off in May and now for the first time EVER I have nothing to pay off. I have been putting extra cash into ING and a non-registered account. 

It feels GOOD!!

Now the struggle is for me to stay away from car dealerships and to keep my wife off mls.ca!!


----------



## Jon_Snow (May 20, 2009)

After years of inaction, my wife and I just maxed out our RRSP's... mine to the tune of 17k, hers 22k...

Looking forward to these refund cheques I can tell you.


----------



## OnlineHarvest (Apr 6, 2009)

jamesbe said:


> Alright now I've caught up with my TFSA and my other half has caught up with her TFSA!
> 
> Now what? LOL I wish there was more room in our TFSA's I guess Jan isn't too far away for another $5k.
> 
> Can I shelter my money in my wife's RRSP? I think I can but I get no tax benefit... except of course savings on capital gains. Is this correct?


What a terrible thing to be maxed out with no more tax shelters to exhaust...the horror! 

I wish I had your problem! 

Why not donate the excess?


----------



## marina628 (Dec 14, 2010)

I have an addition to mls.ca maybe a support group for your wife and me ihatetaxes lol


----------

