No room to open an RRSP

Question: I immigrated to Canada in 1999. I worked through the tax year 2000 but have not yet submitted a tax return to Revenue Canada. I have read your book Retiring Wealthy in the 21st Century and I am keen to start an RRSP because of my age, which is 54. When I phoned Revenue Canada, however, they told me that I could not start an RRSP this year because I have no “room.” Does this mean that I must wait until next year before I can start an RRSP? – P.M.

Answer:

“No room” in this case simply means they have no record of any contribution room available to you because you have not yet filed a year 2000 tax return (presumably you did not work in Canada in 1999). However, you do indeed have RRSP room for the 2001 tax year. Your allowable contribution is 18% of your year 2000 earned income (less any pension adjustment) to a maximum of $13,500.

You may make your 2001 RRSP contribution at any time. But you may not claim a tax deduction for it until you file the 2001 tax return, which will be in the spring of 2002.

If you make an early contribution, however, you can have your withholding tax reduced by making a special application to the Canada Customs and Revenue Ancy. Ask your employer’s payroll department for details. – G.P.