The Canada Revenue Agency (CRA) has made annual announcements about the nation’s retirement programs. Namely, the Canada Pension Plan (CPP) and the Registered Retirement Savings Plan (RRSP) are being updated as we enter the new year.
Here are the changes you need to know and how to use them to your advantage. CRA raises CPP ceiling
In 2021, the maximum pensionable earnings under the CPP will be $61,600. That’s a whopping 4.9% higher than the $58,700 ceiling in 2020. CRA has also raised the rate of employee and employer contributions to 5.45% from 5.25% last year and the self-employed rate to 10.9% from 10.5% last year.
This means Canadians will be paying more towards their CPP in 2021. Of course, this has nothing to do with the ongoing economic issues. Instead, the rates are decided based on a CRA-mandated formula that accounts for wage and salary growth over the past year.
CRA updates RRSP limit
Similarly, the CRA has also raised the cap on the dollar amount Canadians can contribute to their RRSP in 2021. The dollar limit is set at $27,830 for 2021 — up from $27,230 in 2020. Although that extra $500 doesn’t seem like much today, it could add a significant boost to your portfolio, if invested in the right stock.
Bottom line
The CRA has updated rules about the CPP ceiling and RRSP contribution limit for 2021. Both programs are a critical part of the financial future for every Canadian. Investors should use these generous tax incentives to boost their portfolio with all-weather stock or financial products to help you maximize your investments. Contact us for more information.
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