Loading
  • LinkedIn
  • Twitter
  • Facebook
  • Youtube
Get in touch: 604.542.4298 | Toll Free: +1.877.542.4298
Connect Wealth
  • Home
  • About
    • Our Firm
    • Meet Our Team
  • Services
    • Personal Planning
    • Business Planning
  • Investment Counsellor
  • Testimonials
  • Resources
  • News
  • Group Retirement
  • Login
  • Contact us
  • Search
  • Menu Menu
RRSP
Investments, Personal Planning, Retirement Planning

Are RRSPs Overrated?

Are RRSPs overrated?

For many years RRSPs (Registered Retirement Savings Plans) were viewed as the best option available for retirement savings. However, the truth is that there are several variables to consider for your best investment options.

Here is a short list of questions to ask yourself:

(more…)

  1. Is my income below $38,898?
  2. Are my investable assets (not including home, cars, etc) significant- e.g. over $4 million (Depending on the type of assets and ownership structure and current income)?
  3. Am I a business owner?
  4. Am I within 1-3 years of retirement and without much in the way of retirement savings?

If you answered yes to any of the above questions, there may be more tax efficient ways for you to invest for retirement. If however, you answered no to all of the above questions, then RRSPs may be the best option for you.

Here are some additional rules of thumb for RRSP contributions:

  1. How long I am able to defer tax to a future date: RRSPs defer the tax owing until the money is pulled out of the plan. Until then, the money grows tax deferred. Obviously, the younger you are the greater the tax deferral benefit you have. If you are close to retirement then rule of thumb number two (2.) below becomes much more important.
  2. Will my tax rate be lower when I pull money out of my RRSP/RRIF (Registered Retirement Income Fund) Another key potential benefit of RRSP contributions is if you expect to be in a lower tax bracket when you draw on your RRSPs than when you put the money into your RRSPs. For example, if you are in the 45% income tax bracket right now and in retirement will be in the 30% income tax bracket, you are 45% better off to put your money in RRSPs now and 15% better off long-term NOT including the growth on the deferred tax bill. The reverse is also true, if you are in the 30% tax bracket and expect to remain there in   retirement, the less beneficial it will be for you and then rule number one (1.) is more important…how long can you defer the tax on RRSP money and it’s net benefit to you after tax.
  3. Do I have other tax efficient vehicles available to me? Something to consider is whether you have other investment options that are tax efficient enough so that contributing to RRSPs doesn’t make as much sense. A good example of this could be a Holding Company. I suggest you talk to a financial professional about how this works prior to foregoing RRSPs for another investment option.

Some additional things to consider:

  • Always put RRSP contributions to the spouse who earns the highest income. This will give you the biggest bang for your buck. It can be beneficial to split the contributions between spouses through the use of Regular RRSPs and Spousal RRSPs (SRSPs) to keep the amounts the same; but the higher income earning spouse gets the tax deduction. Remember, UP TO 50% of your pension income (LIF – Locked In Funds, RRIF and work pensions) can be split with your spouse if you are 65 years of age or older.

Do any of these scenarios reflect your situation? If one spouse:

  1. Has a significantly higher income than the other, or
  2. Has brought more assets into the relationship than the other.
  3. Has significant deferred compensation incentives through work, or

 All of these examples can create an imbalance of income now and at retirement. With the 50% restriction of pension splitting, this could lead to an increase in taxes owing in retirement if not offset earlier through planning.

  • Always maximize employer contributions. If you work for a company that will match RRSP contributions…do it! If they match your contribution dollar for dollar this in effect doubles your money instantly! Never say no to free money!
  • Home Buyers Plan repayment. If you still have Home Buyers plan repayments, make sure you contribute each year to pay that back and secondly, make sure you choose the option in the tax software/accountant to allocate the appropriate amount to pay the HBP back. Tax software does not always automatically do this for you.
  • Don’t withdraw RRSPs to go on a spending spree. One of the biggest mistakes we see some people make is where they don’t live below their means and use their RRSP account as a savings/spending account. Years later, this creates challenges in generating retirement income.
  • What did you do with the tax rebate? Remember, your RRSPs are tax deferred NOT tax free. So when you get your tax refund it isn’t “free” money. It is future tax money that the government is allowing you to invest until a future point in time. Our recommendation is that you invest it or pay down any debt you may have. This money should not be used for vacations or frivolous spending but to sling-shot your retirement income forward.

If you would like to discuss your unique financial situation, give us a call and we will ask specific questions with the goal of determining the best investment structure for you – Now and in the Future.

February 6, 2017/by Vince Olfert
Tags: financial advisor, financial planning, retirement, retirement planning, RRIF, RRSP, tax planning
Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on Pinterest
  • Share on LinkedIn
  • Share on Reddit
  • Share by Mail
https://www.connectwealth.com/wp-content/uploads/2017/02/rrsp-blog.jpeg 630 840 Vince Olfert https://www.connectwealth.ca/wp-content/uploads/2020/01/ConnectWealth-logo-01.png Vince Olfert2017-02-06 14:27:072018-06-18 14:00:30Are RRSPs Overrated?
You might also like
singerolfert-superheros Superhero or Superhuman?
downsize house To Downsize Or Not?
UK pension UK Pension – Left Behind…
mortgage-insurance Mortgage Insured? Are Your Sure?
mortgage or rrsp Mortgage or RRSP?
Insuring Your Kids – Easily Overlooked!

Pages

  • About
  • About the Examination
  • Alyshia Gallo
  • Antares
  • Appointment Contact Form
  • Baxter’s Business Planning
  • BCV
  • Brittany Potter
  • Business Planning
  • Cassandra San
  • Client Login
  • Contact us
  • Disclaimer
  • dixonmitchell
  • Eddy Choi
  • Financial Terms Glossary
  • Home
  • Insurance Application Tips and What to Expect from a Paramedical Exam
  • Investment Counsellor
  • Joey San
  • Julia Friesen
  • Kathe Atkinson
  • Lori Smigel
  • Mark Smigel
  • Meet Our Team
  • Melanie Tessarolo
  • Michelle Jones
  • Mike Erickson
  • News
  • Our Firm
  • Personal Planning
  • Preparing For The Examination
  • Privacy Policy
  • Referrals
  • Resources
  • Services
  • Shelley Willms
  • Suzanne Jacob
  • Testimonials
  • Vince Olfert

Categories

  • Business Planning
  • Current Events
  • Estate Planning
  • Insurance
  • Investments
  • Mortgages
  • News
  • Personal Planning
  • Real Estate
  • Retirement Planning
  • Tax Planning
  • Uncategorized

Archive

  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • November 2019
  • October 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • October 2018
  • September 2018
  • March 2018
  • February 2018
  • December 2017
  • May 2017
  • April 2017
  • February 2017
  • January 2017
  • October 2016
  • June 2016
  • February 2016
  • January 2016
  • October 2015
  • June 2015
  • February 2015
  • December 2014
Link to: Contact us

Have Questions? We’re here to help!

Our advisors are always ready to weigh-in on your financial strategies and help you develop the wealth management plan that’s right for you.

Reach out today!

Connect Wealth | 13-2970 King George Blvd. | South Surrey, BC V4P 0E6, Canada
Phone: 604.542.4298 | Toll Free: 877.542.4298 | Fax: 604.542.4289

© Copyright 2020 Connect Wealth. All rights reserved. Privacy Policy

RDSP: Ever heard of it?Registered Disability Savings Planfrist-time-homebuyerFirst Time Home Buyers
Scroll to top

This website uses cookies. We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. By continuing to use our site you are agreeing to our cookies privacy.

OKLearn More

Cookie and Privacy Settings



How we use cookies

We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.

Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.

Essential Website Cookies

These cookies are strictly necessary to provide you with services available through our website and to use some of its features.

Because these cookies are strictly necessary to deliver the website, refusing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.

We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.

We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.

Google Analytics Cookies

These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.

If you do not want that we track your visit to our site you can disable tracking in your browser here:

Other external services

We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.

Google Webfont Settings:

Google Map Settings:

Google reCaptcha Settings:

Vimeo and Youtube video embeds:

Other cookies

The following cookies are also needed - You can choose if you want to allow them:

Privacy Policy

You can read about our cookies and privacy settings in detail on our Privacy Policy Page.

Privacy Policy
Accept settingsHide notification only