Are RRSPs a total waste of time? What happens if you over-contribute? How much money should you have in your account? Luckily, the MoneySense experts have answered a lot of RRSP queries over the years. Below, answers to top RRSP questions, from withdrawals to do’s and don’ts.
So, you have a Defined Benefit pension and don’t think RRSPs are worth your time? Depending on the situation (like if your spouse is out of work, or if they are in a lower tax bracket than you), contributing to an RRSP might be a great idea even if you have enough retirement savings.
The biggest differences are contribution limits, and how your money gets taxed upon withdrawal from the accounts. RRSP contributions are tax-deductible, whereas TFSA withdrawals are tax-free.
In your 20s, contributing shouldn’t be a priority but by age 35, you would have to start putting $10,500 a year into your RRSPs to reach a reasonable retirement goal of $500,000. You'll have to adjust based on how much you'll need in your golden years, of course.
Some tips? Be aware of attribution rules and take out as little as possible to extend tax deferral.
It depends on if it’s less than the wiggle room the CRA gives on over-contributions. Here’s what you should do.
Yes. Having a spousal RRSP doesn’t mean your partner will have more access to it.
You can, but it’s best not to. You have to remember how RRSP withdrawals are treated by the government.
Yes. When you’re low-income, it might be best not to contribute to your RRSP.
Combining RRSP accounts might save you in investing fees, but it might not be worth it.
Setting up a mortgage inside an RRSP requires a lot of work with low return. It has to be insured by the CMHC and you also need to charge commercial interest rates so your returns will be limited to three to four percent.
This article was originally published in February 2017 and updated in February 2018.
Subscribe to our newsletters for our very best stories, recipes, style and shopping tips, horoscopes and special offers.