Category Archives: RRSP

Should You Put Money into Your RRSP?

Many of our clients come to us initially with the goal of putting money into RRSP’s, which they expect they will use once they get to retirement. While it often makes sense for at least some of your portfolio to be invested within an RRSP, it is not always the best option for your savings when all things are considered.

RRSP’s do have some advantages. When you deposit money into your RRSP (up to 18% of your income plus unused contribution space from previous years), you receive a deduction from income for tax purposes. Once invested within your RRSP your money will grow on a tax deferred basis until you withdraw it, at which point it is taxed as income.

As I have mentioned before in my blog posts, as the boomers retire they are going to be living longer, but not necessarily healthier lives. We will have less people contributing to the system and more taking out. At the end of the day if nothing changes, there will be a shortage of money available for the government to pay for all of the services we are used to.

“Even if the province wasn’t facing serious economic pressures, the health care system would still need to transform to address the coming demographic shift. Today, health care consumes 42 cents of every dollar spent on provincial programs. Without a change of course, health spending would eat up 70 per cent of the provincial budget within 12 years, crowding out our ability to pay for many other important priorities.”

Ontario’s Action Plan for Health Care. (Ontario 2012, p. 5)-

Based on this coming demographic shift, I often ask clients, “Do you think that tax rates will be higher or lower in the future?” Almost everyone agrees taxes will be going up. We have already seen it happen in the last year. The top marginal tax rate is now over 53%!