RRSP Contribution Limits for 2005 – 2010

RRSP PiggyBank

An RRSP is a government approved program that is designed to encourage Canadians to save for their retirement by providing powerful tax reduction options. The tax breaks come in two forms.

The first is that once you set up an RRSP, the financial contributions you make are deductible from your taxable income which result in IMMEDIATE TAX SAVINGS.

The second is through TAX FREE COMPOUNDING. All interest or capital gains which you earn in your RRSP are tax free until you withdraw them at age 65. This compounding effect plays an exponentially important role in how quickly your retirement grows inside an RRSP vs. outside of an RRSP.

Despite this wonderful opportunity provided to Canadians, of course there are limitations to too much of a good thing. For many years, the Federal Government had frozen the maximum RRSP contribution limit at $13,500.

In the 2005 Federal Budget, the Federal Government increased the maximum contribution limit to $22,000 by 2010. The increments are scheduled to take effect as follows:

Year	RRSP Maximum Contribution	Earned Income
2005	$16,500	$ 91,667
2006	$18,000	$100,000
2007	$19,000	$105,555
2008	$20,000	$111,111
2009	$21,000	$116,667
2010	$22,000	$122,222
2011	Indexed	-

The calculation of your personal contribution limit in any given year is the lesser of the following:

18% of your earned income for the prior year, or
the maximum limit as listed above

You may contribute to your RRSP until December 31 of the year in which you reach age 71.

For example, your contribution limit for 2007 is based on your 2006 income. In order to contribute the maximum of $19,000, the minimum salary you must have earned in 2007 is $105,555.

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