Here’s the scenario:
• Andy turned 71 this year and has earned income of $125,000 in the current year; his spouse,
Mariam, is 68 and is retired.
• Andy will be entitled to $22,500 in RRSP contribution room in 2022.
Here’s the problem:
• Andy cannot make RRSP contributions next year; he must convert his RRSP to a RRIF by
December 31 of this year.
Here’s the solution:
• Andy can make an RRSP contribution in December, 2021 before he converts his RRSP to a
• His over-contribution for the month of December will be subject to a 1% penalty tax = $205
($22,500 – $2000 over-contribution allowance x 1%)
• Andy’s over-contribution disappears in January, 2022; no more penalty tax from that point on.
• Andy has tax savings of $9767 from his 2021 RRSP contribution (at 43.41% marginal tax rate,
minus penalty tax of $205).
Here’s an alternative:
• Andy could contribute to a spousal RRSP in Mariam’s name on January 1, 2022 (or anytime
thereafter) and still benefit from the tax savings this contribution would generate.