How do I maximize the benefit of my RRSP?
Optimizing your RRSP contributions.
To maximize tax savings over your lifetime, here are a few things to consider:
Make sure that your marginal tax rate when you contribute is higher than your average tax rate in retirement. You can find your marginal tax rate here which can help you determine the best account type for you.
Only save enough in your RRSP to support your lifestyle until age 100 (at the latest).
If you’re looking to leave an inheritance for your kids or other loved ones, there may be better ways to do so than through an RRSP, given the taxes. Consider using a TFSA or non registered account instead.
If you’ve saved too much in your RRSP and now your RRIF is providing more income than you need, you should save the extra money coming from your RRIF in a TFSA or non-registered account.
Keeping all of this in mind when planning your RRSP contributions will help you get the most out of your money. That way, you’ll pay the least taxes over your lifetime.
Who can contribute to an RRSP?
You can contribute to an RRSP if you:
Have earned income
Have a social insurance number
Filed a tax return
Have RRSP contribution room available
Are under 71. The end of the year that you turn 71 is your last opportunity to contribute.
Figuring out how much to contribute to your RRSP is important. Do it right, and you maximize your tax savings now, while setting yourself up for a good income after retirement. Do it wrong, and you could find yourself paying more taxes than you have to.
Author: The Link Between