What is the penalty percentage for RRSP over-contributions above the lifetime limit?

The penalty for over-contributions to a Registered Retirement Savings Plan (RRSP) above the lifetime limit is indeed 1% per month on the excess amount. This penalty is designed to discourage individuals from exceeding their contribution limits, which are set to maintain the tax-deferred status of the investment vehicle.

When individuals contribute beyond their allowed RRSP limit, the Canada Revenue Agency (CRA) charges this penalty until the excess contributions are either withdrawn or adjusted to fall within the allowable limit. It is important for taxpayers to monitor their contributions closely to avoid incurring these penalties, which can accumulate quickly. Understanding the rules regarding RRSP contributions is vital for effective financial planning, especially for retirement savings strategies.