Since its inception in 1957, the Registered Retirement Savings Plan (RRSP) has undergone a number of changes, including an increase in the maximum allowable annual contribution limit.
One thing that hasn’t changed, however, is the percentage of income that can be contributed, which has remained at 18 per cent. It may be time to rethink that, writes Talbot Boggs for the Red Deer Advocate.
“The popular tax-deferred savings vehicle has undergone changes, perhaps the most significant being in the early 1990s when the government tried to equalize retirement programs and changed the maximum allowable contribution to the lower of 18 per cent of previous year’s earned income, or $11,500. Since then the maximum allowable contribution has slowly crept up to where it currently is at $26,010 in 2017 but the 18 per cent of earned income has remained the same over the years,” he writes.
According to Boggs, that 18 per cent contribution limit “came about from an obscure equivalency test for saving in various retirement savings plans known as the factor or rule of nine,” devised to try and “equalize the savings opportunities in defined benefit (DB), defined contribution (DC) and registered retirement savings plans.”
Much has occurred since that determination, including increased longevity.
More: Harder for people to save for retirement than it used to be.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans – ARIA pensions blog, 12 Dunlop Street, Barrie, ON, L4N 1V6 – sitemanager@ariapension

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