Q&A: RRSP rollovers


Question: My husband and I are retiring very soon and will both
have severance payouts. My question is: How much are we able to roll over to our
RRSPs to avoid the taxes at this time? Is it $2,000 for every year of service
prior to 1996, and only if you have the room in your plan? Or do you have a “one
shot” opportunity to roll over as much as you would like? – D.I.

Gordon Pape answers: You have, as you put it, a “one
shot” opportunity to roll over as much of your severance (technically
called a “retiring allowance”) as you wish to an RRSP, within certain
strict limits. The maximum you may claim is $2,000 for every year or part-year
of service up to and including 1995. People who do not have pension plans may
roll over an additional $1,500 for each year or part-year of service prior to
1989. You do not need any RRSP contribution room to make these rollovers; they’re
“free” as it were.

You can transfer some or all of the remaining severance as well, but in this
case you’ll need contribution room. If you have carry-forward credits,
this may work out for you. To do this, provide the employer with evidence of
how much contribution room is available – your latest notice of assessment
will have that information – and ask for an equivalent amount to be transferred
tax-free into your RRSPs. Note that the employer is not obligated to do this
but if you’re leaving on good terms it is unlikely the company would refuse
such a request.

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