If you have spare cash available, contribute as much as you can to an RRSP, but within the RRSP room available, income generated inside the RRSP is tax-free and any unused RRSP can be claimed in later years
CRA allows a non-deductible $2,000 over-contribution. Above $2000 level, the excess is subject to a penalty of 1% per month until the excess is taken out.
In some cases, consider borrowing funds to contribute to RRSP
Take out funds from RRSP in low-income years.
Think about transferring shares from non-registered accounts to RRSP account
If you are first time buyer, can withdraw up to $25,000 as a loan to buy a home, without reporting it as income. The loan has to be repaid over 15 years starting the second year of withdrawal.
If you or your spouse enrolls in full time training or post-secondary education, can withdraw up to $20,000 in four-year period. The withdrawal will be repaid over 10 years after the fifth year following the first withdrawal.
RRSP is most suitable for:
Current year has high income, and expecting a low-income years (such as taking time off to take care of children or for extended vacation)– claiming a deduction at 50% and withdrawing in year at 20% rate.
Current year has high income, and planning for retirement years – claiming a deduction at 50% and withdrawing in retiring years when the income is low.
Self-employed as income may vary a lot year by year – RRSP deductions can be used to smooth our tax on high income year. Drawing out RRSP funds at low income year.