RRSP Recap
A Registered Retirement Savings Plan (RRSP) is a government approved tax deferral mechanism. The benefits of an RRSP are two-fold. Firstly, the taxpayer gets immediate tax savings as the contribution is deductible from taxable income in the year. Secondly, the taxpayer is not required to report the annual income earned in the plan.

The federal government has been gradually increasing annual RRSP contribution limits over the past number of years to ensure that retirees are better able to support themselves in their retirement years. The 2008 annual contribution limit is $20,000 and is based on earned income of approximately $117,000 in 2007, subject to various adjustments for taxpayers that participate in other pension plans. The annual limits for 2009 and 2010 are $21,000 and $22,000 respectively and will be indexed to increases in the average industrial wage for all subsequent years. The Canada Revenue Agency provides each taxpayer with their RRSP contribution limit on their annual Notices of Assessment.

RRSP Maximum?
What if I can't afford to make the maximum contribution this year?

Prior to 1991, if a taxpayer did not make their annual RRSP contribution, the RRSP contribution limit for the year was lost forever. The department of finance recognized that taxpayers' income levels can vary from one year to the next and that this rule did not make fiscal sense for a country that was encouraging taxpayers to fund their own retirement. Since 1991, the RRSP contribution limit has become a cumulative figure. Tax payers often take advantage of this RRSP carry-forward limit in years where they may have higher than normal earnings or where they have come into some non-recurring monies, such as an inheritance or the sale of a vacation property.