Comments on: RRSP Mistakes to Avoid

By: Steve Bridge

Steve Bridge — Mon, 24 Feb 2020 01:19:17 +0000

Sad to see misconceptions about withdrawal strategy (or lack thereof). I hate when I see people write that they are paying more tax in retirement/ later years and didn’t touch their RRSP/ RRIF until age 72.
There is so much tax planning that can be done to minimize taxes and draw down those RRSPs.
Unfortunately, there is a lot of misinformation and poor planning done by ‘financial advisors’ as well. If they don’t know what’s best, what chance do regular people have???

By: Jean Pierre

Jean Pierre — Sat, 08 Feb 2020 20:21:55 +0000

And even more powerful as a tax-sheltering solution than the Individual Pension Plan, is the relatively new, Personal Pension Plan or PPP that doesn’t have the age 40 constraint that is identified by Mr. Muhs above since a younger (age 18 to 40) PPP client would contribute under the money purchase limit which always slightly exceeds the RRSP maximum. In fact, actuarial modeling suggests that a PPP client can shelter approximately $2,7 M more than an IPP customer (all else being equal) if the prescribed 7.5% designated plan assumption is used on the extra PPP contributions until age 71.

By: Markus Muhs

Markus Muhs — Sat, 08 Feb 2020 20:08:37 +0000

In reply to JP.

The Individual Pension Plan is indeed overlooked by the vast majority of high income business owners and professionals (with prof corps), and their accountants, I find. One of those little-known things for a good comprehensive financial planner to uncover the need for and help set up.

IPPs become especially useful after age 40 (when the contribution amounts exceed the statutory maximums on RRSPs) and someone under 40 can go ahead and continue contributing to an RRSP and then set up an IPP after 40, rolling over their RRSP assets. They’re mostly useful if you’re already paying yourself in excess of $150K personal income out of your corp and if your corp has excess cash and can benefit from the deductions.

Recent changes to passive income in a corporation also make IPPs more beneficial as a way to shift assets out of the corporation and into a separate trust.

By: JP

JP — Thu, 06 Feb 2020 23:16:24 +0000

Perhaps the biggest mistake with RRSPs in setting one up in the first place when a person could establish a Personal Pension Plan (PPP) where the tax deductions available over a long period of time could be 2 to 3 times the ones allowed under RRSP rules. We have seen cases where a person’s tax assistance (maxed out at $551,000 +/- since 1990 for RRSPs) is more than doubled thanks to the pension legislation that regulates PPPs. Picking the wrong vehicle could be the costliest error of them all.

By: Samantha

Samantha — Thu, 06 Feb 2020 01:57:45 +0000

The greatest benefits of your RRSP account are that you can deduct contributions against your income and your investments will compound tax free. This all sounds great, but at the end you will be taxed fully on your RRSP, and the only question that remains is if the current income deductions received from your RRSP contributions will be taxed at higher rate when you start withdrawing in retirement. TFSA is my primary focus now, although I still contribute to my RRSP account every year.

By: Brenda

Brenda — Mon, 03 Feb 2020 23:52:43 +0000

a mistake we and mostly our financial advisor made is taking into account our pension income, still keeping us in a higher tax bracket and then being required to withdraw funds in a RRIF at age 71. We just end up paying more taxes than we saved in the 80’s and 90’s