RRSP Season Is Here! Get A Higher Tax Refund

[TimLacroix]

RRSP: Registered Retirement Savings Plan Season Is Here!

You have until March 1st, 2017 to reduce your 2016 income and get a higher tax refund.

Making the Most of your RRSPs
[*]You can claim your RRSP contributions as a deduction on your tax return. For example, if you’re in the top tax bracket in Alberta, every $1,000 you contribute reduces the tax you pay by approximately $480.
[*]You won’t pay any tax on investment earnings as long as they stay in your RRSP. This tax-free compounding allows your savings to grow faster.
[*]If you earn more money than your spouse, you can help build their tax-free savings by contributing to a spousal RRSP.
[*]Additionally, you can withdraw tax-free funds from your RRSP for a down payment on a qualifying home purchase.

The Home Buyers Plan (HBP) is a program that allows Canadians to withdraw up to $25,000 in a calendar year from their RRSPs to buy or build a qualifying home for themselves or for a related person with a disability.

Under this plan, only first-time homebuyers are eligible to participate, unless the special rules for persons with disabilities apply.

* You can be considered eligible for this program “again” if you have not lived in a home that you own. Call if you require more information 403-648-1541.

Each spouse or common-law partner can withdraw up to $25,000 (combined $50,000) under the HBP from any RRSP under which he or she is the annuitant.

This is an excellent opportunity to save for your first down payment. Make sure you make use of it!

Contact me for advice!

[ee2k]

This is the approach I follow, but as of late I'm seeing more and more articles about how TFSAs trump this. My conclusion is that RRSPs or TFSA or whatever depends on where you are in your life. Early in your career, say mid 20s, best to maximize TFSA while your earnings are lower. As your earnings rise, the accumulated RRSP contribution room will become useful to reduce your taxable income in the future. RRSP should be seen as a vehicle that should not be touched until retirement.

[TimLacroix]

Originally posted by ee2k
This is the approach I follow, but as of late I'm seeing more and more articles about how TFSAs trump this. My conclusion is that RRSPs or TFSA or whatever depends on where you are in your life. Early in your career, say mid 20s, best to maximize TFSA while your earnings are lower. As your earnings rise, the accumulated RRSP contribution room will become useful to reduce your taxable income in the future. RRSP should be seen as a vehicle that should not be touched until retirement.

Absolutely.

RRSP's are only one vehicle to look at for investing. RRSP's is not for everyone and it is suggested that you consult a financial planner to review all options and find something that meets your current and future needs.

[Super_Geo]

If you think you're going to be climbing up the tax brackets, it makes sense to bank your RRSP contributions for use in the following year when (hopefully) you make more money.

Say this year you made 90,000, your marginal tax bracket is 30.5%
Next year, you move up one bracket to the 91,831 - 126,625 bracket, your marginal rate is 36%.

By deferring your RRSP for the following year to be used in a higher tax bracket, you get a return of 18%.