Comments on: RRSPs: Taking Money Out

By: Murielle

Murielle — Wed, 20 Apr 2011 13:06:23 +0000

Today, many people in their 50′s are taking out their rrsp’s because they are unable to seek employment. Since your EI has run out and you are not able to callect welfare if you have savings in rrsp – We must do what needs to be done – food, clothing, rent are all necessities of life that needs attending to. I shall never save for rrsp I shall find another solution as to how I am going to save my money in the future. Let’s live but One Day At A Time.

By: 2 Cents

2 Cents — Wed, 02 Feb 2011 21:19:42 +0000

One thing to note is that your RRSP contributions are not taxed until you take the money out. That allows you to defer paying tax on that income until you take the money out, which will hopefully be after you retire and are in a lower tax bracket. In the meantime, your investments will grow tax free, and you may just get a tax refund for the year in which you made the RRSP contribution.

If you continue to be self-employed for your entire career, putting at least some money into an RRSP might not be a bad idea, since you won’t be collecting any pension money (aside from CPP). This is especially useful in years where your income puts you in a high tax bracket.

I tend to favour the TFSA over the RRSP for younger and lower income Canadians, but if you’ve already maxed that out, why not put a little tax-deferred money away for retirement, pay down debt, or save for a house?

By: A

Wed, 02 Feb 2011 21:03:32 +0000

i’ve been looking into more seriously contributing into my RRSP and I have to admit am kind of turned off..

Am in my early 20s and when I look at the benefits and my timeline I think i’d be WAY better off saving for retirement in a TFSA over an RRSP

in a TFSA
-i can take money out whenever and not taxed
-capital gain in US and Canadain stocks not taxed
-I hear US dividends are taxed though?
-invest in all the same things as a RRSP

after reading some of the comments am under the impression
in an RRSP
-If you were to withdraw money out before retirement everything (even your already taxed contribution) if fully taxed as regular income?
-sounds like RRSP are still taxed even in retirement?

Am self employed so i don’t see any company benefits and i’ve maxed out my contribution limit on my TFSA and was thing of money some of my gain in the TFSA into an RRSP but starting to rethink this

Am I missing something about RRSP because i don’t see any benefits for someone in my situation

By: GIC Primer: Frequently Asked Questions | Balance Junkie

GIC Primer: Frequently Asked Questions | Balance Junkie — Fri, 09 Apr 2010 09:49:14 +0000

[...] taxed as income. GICs inside RRSPs are like any other RRSP investment: they are not taxed until you take money out of the RRSP. At that point, you will pay tax on whatever money you withdraw at your marginal [...]

By: 2 Cents

2 Cents — Fri, 19 Mar 2010 15:36:44 +0000

Thanks very much Frank. I think the information you provided is valuable for our readers. It’s always great to hear from the pros!

By: Frank Wiginton

Frank Wiginton — Fri, 19 Mar 2010 15:27:09 +0000

Hi BJ,
I am impressed with your blog and what you are doing given that you are not formally educated or trained in personal finance. As a highly accredited and experienced financial planner I want your readers to understand that withdrawing money from an RRSP prior to age 72 is not necessarily a bad thing. Also to reply to George’s comment – seeing the account go down can be stressful but by preparing a proper financial plan and working with an independent unbiased Certified Financial Planner to guide you through the retirement years can substantially reduce (likely never eliminate)those anxieties.
We routinely encourage clients to start taking money out of their RRSP’s early in an effort to reduce and control their tax liability throughout their lives, rather than leave it all in the RRSP only to have a large amount be taxed at the highest rate (46.5%) upon death.
We too have met many people who have a hard time shifting from saving to spending and as a result their quality of life suffers. We routinely encourage our clients (after we have done a proper plan) to spend more money and live and enjoy their life. For many this takes a few years to get comfortable with doing but inevitably they really appreciate and enjoy their new lifestyle.
I will tell the story of my own godmother to illustrate my point. My godparents were married for 39 years and worked most of their lives saving their money and preparing for at least 20 good years of retirement. In their second year of retirement at the age of 60 my godmother was diagnosed with cancer and eight months later at the age of 61 she passed away.
This is why I encourage everyone to prepare a proper financial plan and determine how they can go out and live the life and dreams they always wanted.

There is also a very good calculator at http://www.tridelta.ca/retirement_100.php that will help you estimate whether or not you will out live your money and what the value of your estate and lifetime tax liability will be. You can watch a video of me on BNN discussing these issues at http://www.tridelta.ca/news_007.php .
I have also just started blogging and am still constructing my website but you can check it out at http://www.frankwiginton.ca .

By: Should You Take Money Out of RRSPs to Pay Off Debt? | Balance Junkie

Should You Take Money Out of RRSPs to Pay Off Debt? | Balance Junkie — Fri, 19 Mar 2010 14:52:26 +0000

[...] will have to pay taxes at your marginal rate on the money you withdraw. (See RRSPs: Taking Money Out for a rundown on withholding [...]

By: Weekly Round Up- Myths, Infidelity, Bear or Bull and more

Weekly Round Up- Myths, Infidelity, Bear or Bull and more — Sun, 31 Jan 2010 15:57:36 +0000

[...] RRSPs: Taking Money Out by Balance Junkie [...]

By: Allan

Allan — Fri, 29 Jan 2010 04:56:35 +0000

Valuable tax information for all Canadians. .-= Allan´s last blog ..Tax cuts at Your Fingertips!- Television Commercials =-.

By: 2 Cents

2 Cents — Thu, 28 Jan 2010 18:15:22 +0000

That’s a great point George. Just the thought of my accounts decreasing makes me nervous, even though I am decades from retirement. I would be interested to hear more from retired folks on what it’s really like and how well their planning has worked out for them. The fact that your friend has not fully retired speaks volumes. It must be really difficult to let go of that income stream for good. Thanks very much for sharing your thoughts!

By: George

George — Thu, 28 Jan 2010 17:51:21 +0000

I had the privilege of talking with somebody who was semi-retired in her 60s a few days ago. She said that the hardest part about retiring was actually SPENDING the money that you’ve spent a lifetime saving, and getting used to the fact that your account balance will typically DECREASE every year. Apparently (and understandably) it’s very unnerving to see the numbers get smaller and smaller, after 40+ years of watching them get larger and larger each year.

Certainly it makes sense to aim to run out of life before running out of money, but I’m sure many retirees have the opposite problem – becoming comfortable with actually spending the money put into the nestegg.