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Still not too late to contribute to RRSP for 2016

on Fri, 02/24/2017 - 23:59

I was chatting with a prospect who stated he would do some RRSP in the last meeting and then changed his mind after the paperwork was submitted. He said he made the decision too fast and decided not to put the money in. Welll, the transaction didn't go through, of course. 

So we chatted on the phone and he said he flavors TFSA more than RRSP. I have no specific preference on either, to me, it comes down to what works best and it is only an "account type". Most of the time (between TFSA and RRSP), you have very similar investment choices under the two. 

He mentioned he "wouldn't be taxed when he contributes into TFSA and he gets double tax when he does RRSP". That is a wrong perception. When you contribute into TFSA, your money is already got taxed. What is non-taxable? Is the growth on the money.

When you contribute into RRSP, whatever you contribute is NOT included in your income, so it is not taxed. When you do that, people roughly get about one third (all depends on your income level and if you have other sources of tax credits) of the amount of tax saved. If you have to pay in, you result with a lower tax bill; if you have already paid in, you get a bigger refund cheque. 

You can always put that refund into a TFSA. Then you technically effectively get the government to fund you TFSA on top of having your retirement set (at least a start). 

Bear in mind, you have only once a year (at this time, by now) to take the chance to lower your tax for last year, you miss that, there is no way to go back. When you know already how much you are making, and some people might have already calculated how much tax they owe, this is only benefit to contribute into RRSP after proper review. 

I told him he can always withdraw it should he changes his mind again. It will then taxed at the income level he takes it out that year. And he agrees. 

*it is not too late to do RRSP for 2016. Contact us and let's see if it is good for you.  

I have yet to know if it would have costed him avoiding that first transaction...

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