Monday Nov 06th, 2017


By: Joseph Cartaginese, Broker
TheRainMakerTeam @ Royal LePage Your Community Realty


The primary purpose of an RRSP is tax deferment from a current high marginal tax rate to a lower marginal tax rate in the future.

If you are one of those lucky individuals whose marginal rate will keep on increasing and never reduce, you do not need an RRSP.

The majority of us are not that lucky. Therefore, an RRSP could be quite useful for a number of us. The following are some of the benefits to an RRSP:

A)     Contributions to your allowable maximum are tax deductible;

B)      All savings grow (without tax), but are taxable when they are withdrawn;

C)      No tax is payable until withdrawn;

D)     Spousal  contributions have many advantages;

E)      RRSPs may be used toward a first time home buyers plan;

F)      Lifelong Learning Plan.

These are some benefits to RRSPs and they can be an incredible tool if used properly.  Unfortunately, too often individuals do not understand the purpose of an RRSP and do not use the tool effectively. We must remember that an RRSP is not to help you with your down payment on purchasing a home, but instead it is to defer your marginal tax rate.  Most young people will have drastic increases in their incomes as their careers take off. One strategy would be to let the allowable RRSP deductions grow and then decide in the future. So, before jumping on the RRSP bandwagon, ask yourself if it is in your best interest at the particular time or consult with a professional, an accountant might be a good start.

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