Unused RRSP or TFSA Contribution Room
In the first year of the projections, your client may have unused RRSP and TFSA contribution room that you would like to account for. This article details how to update that room for the year that you are starting the projections. Going forward each year, Snap will track the available contribution room so that it can be used later in the projections and contributions will be limited to the maximum value allowed.
- RRSP contribution room is based on many factors including the new room that is generated from RRSP eligible income each year up to the maximum, contributions made each year to the registered assets, and the pension adjustment.
- TFSA contribution room is increased each year by the current maximum annual contribution of $6,000 indexed by the inflation rate specified in your scenario and rounded to the nearest $500. Contributions and withdrawals from the TFSA are taken into account to calculate the available contribution room each year.
Assumptions for the Initial RRSP and TFSA Contribution Room
There are a few assumptions that Snap Projections makes with regards to the initial RRSP and TFSA contribution room in your scenarios.
- RRSP contribution room for the first year of your projections is calculated as 18% of any RRSP eligible income that was entered on the Income page during the initial data entry. (For example, $18,000 when the employment income entered was $100,000.)
- TFSA contribution room for the first year of your projections is set to the maximum TFSA contribution room for that year only. (For example, $6,000 in 2022.)
Note that a default value for the RRSP Contribution room is only populated during the initial scenario setup. If you proceed to the Planning page without entering any RRSP eligible income first, the RRSP contribution room for the start year of the projections will default to $0. If you choose to edit the RRSP Contribution Room for the start year of the projections as shown below, your edited value will be saved. If you then update the RRSP eligible income, no changes will be made to your saved value for the RRSP Contribution Room for the start year of the projections.
How to update the initial RRSP and TFSA Contribution Room
Under Scenario Setup -> Assets -> Capital Assets. Select TFSA for editing the TFSA contribution room or RRSP/RRIF for editing the RRSP Contribution room.
You can adjust both the RRSP and TFSA Contribution Room amounts for the start year of projections. In these text boxes, enter the total contribution room including the amount for the start year of the projections.
The initial settings for this client were based on $100,000 of Employment Income and the start year of 2022. RRSP Contribution Room for 2022 was set to 18% of $100,000 and the TFSA Contribution Room for 2022 was set to $6,000 which is the maximum TFSA contribution for 2022. These default settings are a good starting point, but this client has additional unused room for both the RRSP and TFSA. Their RRSP Contribution room based on their Notice of Assessment is $29,412 and their TFSA Contribution room is $81,500 since they have never contributed to a TFSA in the past. Therefore, we have updated the values to the following.
Note: For scenarios created prior to March 30, 2022, the RRSP Contribution Room for the first year of your projections was set to $0 automatically. This prevented any RRSP contributions in the first year of the projections. To prevent confusion over this, we updated the software to make an assumption that the RRSP Contribution Room for the first year of the projections is 18% of the eligible employment income.