News Features

RRSP season arrives in Canada

by Charlie Smith on January 14th, 2015 at 1:15 PM
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      This year’s deadline for making a tax-deductible contribution to a registered retirement savings plan for the tax year 2014 is 11:59 p.m. on March 2.

      The Canada Revenue Agency allows the lesser of 18 percent of earned income from the previous tax year or $24,270. Taxpayers can top this up with unused contribution room from previous years, but they’ll have to deduct any pension adjustments. There’s no minimum age to begin stashing money in an RRSP, but a person must be 18 years old to contribute more than $2,000. 

      Anyone with earned income can put money in an RRSP until they turn 71.

      Comments

      2 Comments

      No Thanks

      Jan 14, 2015 at 10:34pm

      Unfortunately unless you make 6 figures RRSP's are not a great investment for the average Canadian wage earner.

      1. Money in the Bank with single digit average returns devalues over time (Inflation),

      2. You have other better stores of value for money, e.g., Real Estate keeps pace with inflation over long time periods but is subject to regular economic cycles,

      3. You get double taxed once you retire and start withdrawing as you must according to the RRSP rules,

      4. You get clawed back dollar for dollar on all benefits (not talking welfare) old age stuff, like Heatlhcare Costs (u need it most when ur old for most) etc, based on your RRSP "income" that is you end up losing benefits and their future value on top of double taxation on income you already paid tax on.

      For RRSP's to make sense yoou need to be high income bracket.

      For the average Canadian wage earner (the majority) TFSA's etc are far better.

      "This is because when you add up Canada Pension, the Old Age Supplement and the Guaranteed Income Supplement (if you qualify), your income might actually be higher after you retire, meaning you would pay more income tax — and not less, per the typical RRSP scenario."

      source : columnist ellen rosen.

      One more thing to consider about a TFSA vs a RRSP – by age 71 one must convert their RRSP into a RRIF and start withdrawing an ever increasing minimum yearly amount.

      Once retired (and not earning income) one can’t continue to contribute to an RRSP. However, with a TFSA, if one has the money, annual limited contributions can continue for the rest of your life, with generated interest income accumulating tax free.

      Further most people don't factor the Cost of the (ridiculously high Bank charges/ Mutual Fund Fees) these Fees even on "No Fee" Funds wipe out 50% sometimes more of the investment gained.

      As with most important things carefull planning is required.

      Well Said

      Jan 15, 2015 at 1:56pm

      @ No Thanks

      You are totally right. I cashed in about $50,000 in RRSPs over ten years to minimize the tax repercussions, and I put it all on mortgage debt. Better to pay off mortgage debt than to buy RRSPs. They are a total waste of potential.