I'm trying to do a last minute lump-sum RRSP contribution. I have an idea of how much I'd like to contribute/carry forward, but this is my first time making a significant RRSP contribution, so I'd like to make sure I'm not making any huge mistakes. I've rounded all of the numbers for simplicity.
- I live in Alberta
- My RRSP contribution limit this year is $26,000
- My taxable income is $63,000
- A financial windfall has left me $30,000 (post-tax) to invest for retirement
- I've already contributed $3,600 to a group RRSP this year
- I don't have any non-RRSP tax deductions
With this in mind, my plan is to make a lump sum contribution of roughly $13,400.
With this contribution, my total RRSP contribution will be $17,000, which is the difference between my taxable income and the lowest federal tax bracket. From my understanding of RRSPs, there isn't a large benefit from contributing once your taxable income is in the lowest tax bracket.
Next year, my taxable income will (hopefully) be $73,500, and my plan is to contribute 18% of that from each paycheque. That works out to $13,230, and deducting that, my taxable income would be $60,270.
I'll still have $12,600 of contribution space carried over from this year and $16,600 in my savings. If I then contribute $12,600 as a lump sum, my taxable income will be $47,670, which means that all of my tax deductions will be from the higher tax bracket.
All of this makes sense to me, but as I said, I want to make sure I'm not missing something in my understanding of RRSPs. I don't expect to be in the next tax bracket (~$90,000) in the near future, so I don't think there's any point holding onto the money for future contributions.