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Email this7:22 am
December 17, 2016
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Two articles from the National Post - they both trot out the same old story re: the benefits of owning RRSPs -
The five biggest RRSP myths that Canadians can't stop repeating
http://business.financialpost......-repeating
Almost 40% of Canadians see ‘no point’ in investing in RRSPs: poll — here’s why they're wrong
http://business.financialpost......y-suggests
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These so called experts never talk about the individual who will never be in a lower taxable position, even in retirement, and the absolute tax burden they will carry i.e. the individual with 7-figures in cash PLUS 7-figures in an RRSP plus OAS & CPP plus ???
10:11 am
September 11, 2013
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The focus on contribution is misplaced as the problem is not contributing to or having an RRSP, the problem relates more to when you claim the deduction. You can claim your deduction anytime you want, so save it for your highest rate years if that suits you better.
10:15 am
December 17, 2016
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Bill said
The focus on contribution is misplaced as the problem is not contributing to or having an RRSP, the problem relates more to when you claim the deduction. You can claim your deduction anytime you want, so save it for your highest rate years if that suits you better.
I'm not sure I knew about that option in my contributing days - but I likely still would have opted for the instant gratification of the yearly tax break.
And, if I recall correctly, I had HR adjust my tax deducted at source taking into account the maximum RRSP contribution for the year - which dulled any tax-break celebration upon filing my T1.
Recalling further to those days, INSTEAD of celebrating the tax break I probably had to write the government a healthy cheque because I cashed out some stock options.
11:06 am
January 3, 2009
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Bill said
The focus on contribution is misplaced as the problem is not contributing to or having an RRSP, the problem relates more to when you claim the deduction. You can claim your deduction anytime you want, so save it for your highest rate years if that suits you better.
This is an excellent point most people are unaware of, but you need to be careful that you don't wait too long, because interest lost on the unclaimed deduction adds up over time.
12:17 pm
September 11, 2013
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voodoo22, it's not only interest but could also be capital gains or dividends, depending on how you invest your refund money.
The focus on the immediate refund is a big part of the marketing by the "rrsp industry" out there, that's likely why the tactic is not often referred to. Or else there aren't many outside-the-template thinkers in the financial advice industry.
1:57 pm
February 17, 2013
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Interesting articles. The point they didn't make is TFSA's are not considered part of your income when it's time to stick you in an old folks home. In BC, "Expect to pay 70 per cent of your after-tax income, plus a hydro surcharge" for subsidized living (from BC govt Independent living web site). I presume, from other discussions here, that TFSA inetrest/withdrawals are not income, therefore not deducted to pay your living expenses. Like the article said though, not an option for someone retiring sooner rather than 20 or 30 years down the road.
1:31 am
October 21, 2013
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Financial advisors etc would not likely promote deferral of RSP deductions because most of their clients would probably want an immediate refund. Delayed gratification is not too popular these days.
In addition, financial advisors determine your value to them in terms of your "invest-able assets". If you haven't claimed the refund, these assets are lower.
8:29 am
December 17, 2016
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I truly believe one of the solid reasons for claiming your RRSP contribution yearly is “you never know what life holds for you” i.e. go with the bird in the hand rather than the two in the bush adage.
9:00 am
April 6, 2013
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I think the executor can still claim the RRSP contribution deduction on the final returns.
Definitely a big return for the deduction when used in the year the entire RRSP or RRIF is collapsed and added to income.
9:21 am
December 17, 2016
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My thinking isn't on death of the RRSP holder BUT rather change in life where the "benefit" of deferred taxation wouldn't be as beneficial to the holder later as it would have been in the present.
There's probably a bunch of what if calculations that can be run to prove or disprove that thought - but I won't be going there - I'm in the planning for the month of March in Europe and enjoying the retirement money.
10:32 am
April 6, 2013
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Ed Rempel's calculations, to determine the optimal split between TFSA and RRSP contributions, do take into account a desired refund for spending. 
The calculations do need to be done. One can't just go by the tax rate on the RRSP deductions and the tax rate on the withdrawals.
In one case, it looked like the RRSP was a big mistake. $400,000 of RRSP contributions were deducted at 32½% average and the $1.3 million of withdrawals were taxed at a higher 40%!
However, the calculations showed that the original principal was withdrawn tax free and the growth taxed at 16.05%. That is as if the growth was taxed as capital gains realized during the contribution period (half of 32½%).
11:08 am
December 17, 2016
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Norman1 said
The calculations do need to be done.
I don't entirely disagree with that statement . where I go offside with them is the constant assumptions that are made by advisors and tax planners in those calculations . and the ONLY way to plan for the what if of opportunity cost . or the what if of income interruption is to do monthly, semi-annual, or annual calculations, which absolutely removes any predictability for long-range planning.
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