Personal Finance

Purposely overcontributing to RRSP

  • Last Updated:
  • Apr 3rd, 2019 4:54 pm
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[OP]
Deal Addict
May 11, 2003
2601 posts
417 upvotes

Purposely overcontributing to RRSP

Has anyone ever purposely over-contributed to their RRSP, for the sole purpose of being able to shelter returns from their current taxes? I'm only talking about over contributing by less than $2000 per year, which is the eligible amount without penalty.
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12 replies
Member
Jul 25, 2008
400 posts
274 upvotes
ottawa
honestly it doesn't seem worth the hassle of keeping track of it, for such a small amount.
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Jul 30, 2007
28962 posts
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Toronto
.... this $2000 turns into a $200,000 within 1 yr. Then you did the right call. Winking Face
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Sep 19, 2009
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Toronto
e-man wrote: Has anyone ever purposely over-contributed to their RRSP, for the sole purpose of being able to shelter returns from their current taxes? I'm only talking about over contributing by less than $2000 per year, which is the eligible amount without penalty.
If I am not mistaken, it is $2000 per life time, not per year.
Jr. Member
Oct 27, 2018
123 posts
52 upvotes
Have you maxed out your TSFA?
[OP]
Deal Addict
May 11, 2003
2601 posts
417 upvotes
andrew4321 wrote: If I am not mistaken, it is $2000 per life time, not per year.
Hmmm...most of the articles don't say anything what time period it applies to. There is one, though, that says lifetime. In that case, it doesn't make any sense to do this.
Last edited by e-man on Apr 1st, 2019 4:02 pm, edited 1 time in total.
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[OP]
Deal Addict
May 11, 2003
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s7yl3x wrote: Have you maxed out your TSFA?
Yeah.
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Sr. Member
Jan 13, 2016
536 posts
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Vancouver, BC
I accidentally overcontributed and had to use this so definitely save this.
Deal Addict
Dec 4, 2016
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Save this. RRSP contribution mistakes are made sometimes, and you want that buffer. Personally, I don't contribute what I can't deduct immediately, so I usually have room to carry over to next year.
Sr. Member
Jan 5, 2006
998 posts
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Mississauga
I overcontributed this year, all the money went into a spousal RRSP so that in 3 years, my wife can pull it all out when we start a family. I will not be putting anymore in, hence the intentional over contribution.
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Jul 8, 2013
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e-man wrote: Has anyone ever purposely over-contributed to their RRSP, for the sole purpose of being able to shelter returns from their current taxes? I'm only talking about over contributing by less than $2000 per year, which is the eligible amount without penalty.
I haven't purposefully "over" contributed but I am over the limit by a few hundred dollars. That is because I just round up to the nearest 1,000 dollars when I put money in my RRSP.

For example, if my NOA says I have $14,8xx room I put $15K.

This is a good buffer and the lifetime limit is $2K.
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Jan 23, 2019
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Black site, Canada
e-man wrote: Hmmm...most of the articles don't say anything what time period it applies to. There is one, though, that says lifetime. In that case, it doesn't make any sense to do this.
It can still make more sense to have an extra $2k in your RRSP growing tax-free than to have it outside the RRSP... until you make a mistake and actually over-contribute and have no $2k buffer to help you avoid penalties :)
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Sep 19, 2013
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I can confirm 100% that the over contribution room is lifetime and not per year. You should not willfully over contribute early in your life because the room is there for a purpose (to protect you for over contribution mistakes).

It makes sense to willfully over contribute upto $2000 if
- your RRSP room is fully utilized and
- you have money to contribute and
- you are closer to age 71 or converting to RRIF

Note that you dont get deduction on this over contribution, only tax-free growth.
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