5 RRSP Mistakes You Don't Realize You're Making
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- Опубліковано 1 чер 2024
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In this video we'll go through 5 RRSP Mistakes that you may be making.
If you have any further questions about this video's topic or any financial planning questions in general, I encourage you to find a certified financial planner in your area or book a consultation with us to get your retirement plan on track. You can learn more about our services at www.parallelwealth.com/planning
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0:00 - Intro
0:26 - Mistake 1
1:52 - Mistake 2
3:24 - Mistake 3
5:31 - Mistake 4
7:33 - Mistake 5
This presentation is intended for information purposes only and does not constitute an offer to buy or sell our products or services nor is it intended as investment and/or financial advice on any subject matter. Every effort has been made to ensure the accuracy of its contents. Certain of the statements made may contain forward-looking statements, which involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Returns are not guaranteed and past performance may not be repeated.
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DISCLAIMER: The videos and opinions on this channel are for informational and educational purposes only and do not constitute investment advice. Adam Bornn is not registered to provide investment advice and as such does not provide recommendations - those looking for investment advice should seek out a registered professional. Adam is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.
Biggest RRSP mistake is letting Investment Companies take so much in fees :(
Another one might be, carrying forward your contribution to future years when you believe you’ll earn more money.
I contribute my max every year but will only claim deduction when so that I remain near the top of whatever bracket I’m in. Last year, I was ~30K above my current bracket due to OT, other income, etc, etc but because I didn’t deduct several previous years contributions, I managed to drop myself down to a lower bracket but still enjoyed the extra 30K income.
Excellent video Adam!
Keep them coming! 😊
Thanks! Will do!
Excellent video Adam, I keep sending your videos to my friends. Thanks
Awesome, thank you!
This was very helpful and clear. Thank you
Glad it was helpful!
Retired at 42 with 350k RRSP invested in stock market. Now 70 have withdrawn 1.2 million from RRSP over the years with 440k in RRSP's left to RIF. Yes RRSP's work.
Thank you for sharing 😃.
Im building up RRSP positions hoping to retire at 45. Any tips or lessons learnt?
Wow that's an impressive run with only $350K to start.
That was some amazing ROI. Who’s your investor?
Spent many years with a Mr. Taylor at Wood Gundy. Retired now but taught me to max my returns. I have had losses but all in all it's been a good experience. The 2008 financial crash took 50% of value off portfolio but the dividends keep rolling in and 18 month later everything back to normal. Been thru many market swings you just have to focus on the continuing dividend income. I think the years I was with Wood Gundy he had a 13% average return. That's the dividend and capital appreciation combined. My motto has been no dividend no buy, Looking for max income now so most ETF's in portfolio have a covered call overlay, but not leveraged. Do your own research and you'll find that dividend stocks perform close to or over market returns.@@dnicolle
@@dnicolle. Isn’t that just over 5.5% annually…. Not including withdrawals over that time frame, that’s a little more than half of the market index. Overall, I think they did very well, but I am not sure how they lived on such low income over the last 28 years.
What??? I was fully expecting #5 to be "not melting down". Was not expecting "misunderstanding succession". Oh, hang on! There it is at 08:30!!!!! I knew it would be there😊
Thanks for the well done video, Adam
Thank you for talking about PA for pension plan. I never understand it. I might have asked my accountant and still confusing myself with that.
I invested when I was 20, joined a company matching plan at 25. Started a spousal and retired at 40 with $700k in mine, $280 in hers. I’m on my disability pension so I’m taking them out slowly to stay at the lowest tax bracket so I don’t have to pay a lump sum at death.
Also I used 20k to buy my first house in 1995.
Great information....wonder if you will do a video of what Canadians should do with US 401ks.
In the old days, we took the tax refund and pay it on the mortgage. No TFSA’s. But that built asset. We also borrowed in Feb, buying RRSP’s and used the return to help pay off the loans. But by the time I was 55 we had 60K in RRSP’s. I know, mixed messaging. All the money was in real estate. After selling it all, we maxed out my wife and my RRSP and TFSA’s. Its never too late. I would also comment, talk to your kids, Wealthy Barber is a great book. Get them all saving 10-15% monthly into RRSP. Secondly, kids nowadays seem to have the idea RRSP’s are bad, cause you pay more taxes when you need them. When you reach 60, and only need 50/60K to live, the savings on a 100K salary over the years is worth it. Hugely worth it if you have assets you need to liquidate. Unlike me, my grown kids will receive a financial education.
There is no reason to contribute to RRSP unless you have income in the second tax bracket (or higher) or plan to leave Canada and slowly "melt down" your RRSP when you do not have a Canadian income any more.
Contribute to RRSP money that are taxed at 25% rate (which is usually the case for young people) only to pay the same 25% in the future does not make much sense 🤷
The client you have sounds like my brother-in-law. We tried to convince him that using the RRSP as a savings account was a bad idea. At the time he had a great job and was at the highest tax rate, so only received 1/2 of the RRSP money. Plus the money in the RRSP was invested in Investors Group mutual funds - so when he pulled it out he had to pay their fees. No matter if we showed him how bad this was on paper, his ego wouldn't let him admit that what he was doing was ineffective.
Your brother-in-law got it right that contribution to RRSP is a very great idea. Whether he is best to keep his RRSP savings in a group RRSP is subjective. I can tell you this because I am old enough to be reaping the benefit from my lifelong RRSP savings.
Last few years I’ve been using my tax refund and topping up my tfsa. I also move my monthly dividends from my non-registered account to also top up my rrsp which gives me a bigger tax return.
Helllo, should I start taking out my rrsp, before I turn 65, since I have dtc certificate....would that make better tax rate in the end ? I f you can more explain what options are available for disabled Canadian citizens and how dtc would help me into retirenment....thank you
Hey Adam, do you know if we can do a securities transfer of VUN from our CAD RRSP to VTI in our USD RRSP? Or would I need to sell, do Norbert's Gambit, and then re-purchase?
Adam, I’d like to hear more about the Pension Adjustment and how you mentioned it’s not calculated dollar for dollar. Can you shed some light on how it IS calculated please?
I am no expert, but I believe it has to do with the type of pension.
If you have a defined contribution (DC) pension, I think you can calculate what the pension adjustment will be.
But for defined benefit (DB) pension, the calculation is a lot more complicated and you just have to wait to see what number they put in Box 52 of your T4 :)
Could you please make a video reviewing tax strategies when someone is already at the highest tax brackets with non-registered income sources and the RRSP early meltdown strategy has no tax benefit. Thanks
Have you ever discussed and open account and perhaps it’s benefits. I know at one time it was felt an open account worked best up to about a yearly salary of about $90,000.
I only started learning about this stuff 5 years ago and I'm 53 now. When I retire at around 60 I will only have 22 year pension from my job and I earn around 90g. I have 40g in RRSP in mutual funds and some stocks but now that ive learned more I wish it was in my TFSA. Im guessing withdrawing interest earned (by ETF's, selling stocks ect ) from a TFSA is a better idea than getting it taxed when you pull it out of an RSP. Woldnt it make sense to max out your TFSA first if you are someone who will be getting a pension?
Absolutely. RRSP is good for guys like me who will have next to no pension.
But guys with a pension will have to pay hefty tax on the RRSP withdrawal.
I used my RRSP for a downpayment on my first house. had to pay the tax back, but it was worth it, I think.
Did the same thing.. made 180k in equity in exchange. So yep definetly a win.
Please explain the difference between Survivor and Benificiary ! It is extremely important for people to understand this concept !
Survivor is a spouse or CL partner. Beneficiary is the person listed on the account as the beneficial owner to receive the account at death.
Please make a video on donation and tax saving
hey adam i don't necessarily want to retire but i dont like my job if i were to work less and only make about 15 -20k where would i take the money from rrsps or tfsa? or a non registered if the others are still full also i remember you saying you should have a part time job to not lose your mind in retirement
I'm no financial expert, but I'd say always take from your TFSA. You can replace it without penalty in 2 years. Can't replace RRSP money.
Hi Adam,
What if I get a lump sum severance package... I will need the money and will be hit with a high tax rate... perfect RRSP time, but I need the money as well.
Try to get them to pay you the next year when your income/tax bill is lower. Maybe you can't afford to wait, though. Then contribute to your RRSP before the end of February if you can afford to.
Yes. I have differed the lump sum until Jan, 2024.
Your suggestion makes sense.
Correct me if I’m wrong but if I’m penalized for 1% for over contributing, would it still be better to take the 1% hit since interest is compounding between 4%-6% every year?
1% per month
if you have carry forward room, are you able to contribute over that 18%?
You can contribute up to what your Notice of Assessment says from the previous tax year which will include any carry forward amounts.
...which means yes, more than 18% in that case.
The underlying assumption in RRSP's is that retirement income and tax rates later will be lower. My retirement income will probably be well above the top rate threshold, so there is no rate benefit to deferral. I doubt the spend thrift government will resist the urge to raise already nose bleed tax rates higher. That is people who contributed expecting lower tax rates in retirement may have a lower income and a higher tax rate. Also, gains in RRSP are taxed at the full rate and don't take advantage of the dividend tax credit or the capital gains exemption, offsetting in part the advantage of deferral. One way to secure a lower tax rate on RRSP withdrawals is to move to a lower tax jurisdiction (for example some Caribbean islands with zero or low tax) before making the withdrawal. There is still a withholding tax, but less than the full tax rate.
It can certainly be true for you that your tax rate may be higher in retirement but for the vast majority of Canadians this is not the case, especially for couples who can leverage RRIF income splitting after age 65. If one has saved such a vast portfolio as to result in paying a higher tax rate in retirement then taxes are probably not a serious concern for them, but for the rest of the population they should be leveraging the tax deferrals that RSPs provide.
IMO RRSPs are like a self funded pension for those who won’t retire with one through their work or may need a source of income later on in life. I have an aunt & uncle who both retired from government jobs with full pensions and about 500K in their RRSP, because all throughout the 80’s & 90’s while they were working the mantra was “max out your RRSP every year”. Except now in their 60’s their employment pensions are over 200K annually and what they’ll have to take out from their RIFs will eventually put them into an even higher tax bracket, and it’s not money they actually need as income in retirement. Granted this was before TFSA’s were in the picture but had they known that their pension income was sufficient they’d have maxed those out instead….could take any of that 500K out tax free AND get the room back the following year. All depends on everyone’s different retirement situations as to what’s best, but always best to look ahead.
I only started paying attention to saving for retirement 8 year ago at 45 years old even tho I started making good money at 37. I knew nothing and from a life time of hearing "RRSP!" I started putting money there. As I started to learn I realized that for me TFSA was the way to go. I will have a pension but only around 22 years or so but even so.. I think TFSA would have been better move. I now have 50g in my RRSP in stocks and mutual funds and I feel like its trapped there. I wish I could just yank it out and put it in my TFSA. I see people putting all there money into TFSA into ETF's and when they retire there TFSA will be generating thousands each month tax free. Seems like a better plan that having it get taxed when it comes out of RSP.
They will also have their Old Age Security reduced possibly to zero. Government is going thanks for being a good saver. Currently burning down my RRSP before turning 65. Of course the ”advisors” are against this idea.
@@user-xj5xp6qz5gdon’t forget that if one is in a 40% top marginal tax rate, to contribute $6,000 to their TFSA they had to earn $10,000 of income ($4,000 went to tax) but one could have contributed the whole $10,000 to their RSP tax free (assuming they had the room). Yes, the TFSA adds incredible flexibility but it’s not as simple as saying should I invest $6,000 in my RSP or TFSA because I have to consider the tax consequences (and my take home pay that results).
I would add a sixth mistake, which is contribution late in the tax year. In theory you can contribute your 2024 RRSP contribution on Jan 2, 2024 if you assume you will remain employed for the year and the amount is equivalent to your prior year (you can always top up after your 2023 tax return is done). Many wait until end of February 2025 to make their contribution last minute.
Or split the amount over 12 months and adjust it as you get more information.
Any US stocks that pay dividends, make sure to hold them in your RSP plan to avoid paying 15% withholding tax on US source dividends.
US dividends are assessed 15% withholding tax when held in a TFSA and non registered account.
I am currently single and have made my Estate my RSP beneficiary. Is that wise?
Does Parallel Wealth work with people who omly have around 300k to invest?
We offer fee for service retirement planning for people with any amount of assets. www.parallelwealth.com/planning
I would be interested in showing to see if tax deferment is really worth it, especially for those of us who are in a low tax bracket now and will be in the same or even a higher tax bracket in retirement. I have been an advocate for the TFSA but I have RRSP unused contribution room that I won't use because I believe it will not work out, ie paying more net taxes and losing possible govt benefits. I'll be very interested to see how the numbers work out in the end. Is deferral really so amazing just on its own? Can't wait to see. Love your videos.
You are pretty much correct. Adam has several videos where he refers to an income threshold of about 50K. Over that, contribute to RRSP and tax refund into TFSA. Under that, focus on TFSA as won't realize tax benefits
@colinmagee5155 Thanks for confirming my initial thought. I really loved the TFSA and wished it had a higher contribution level, especially for those of us without a pension. I was so upset when Trudeau reversed the 10K amount instituted under Harper.
Unless you are in the lowest two tax brackets and that you will be eligible for GIS, or that you are in a very high tax bracket and your post-retirement income will be higher than your pre-retirement income, I think most people will benefit with RRSP tax deferral. That is, most people will fall into a lower tax bracket after retirement.
@@ryanm7171If you are in a lower income level and thusly tax bracket and are maxing out TFSA room, first off, good for you. Secondly, then believe you should utilize RRSP as well anyway. Any tax break and working tax level vs retired tax level aside, it is still tax deferred growth. I utilize the one tip Adam mentioned where I contribute to RSP and take the tax refund from that and contribute it to my TFSA. Looking forward to RSP/RIF meltdown when I retire 🙂
Im trying to figure out if it even makes sense for me to put money into an RSP without having maxed my TFSA first. I will only have around 20 years pension when I retire at 58 - 60 so I wont get getting a lot each month. Seems to make more sense for me to max out TFSA first so when I do retire and I start withdrawing the interest earned on whatever I have in it (ETF's stocks etc) I wont be taxed on it. I dont have enough cash each year to max out both as ive only been contributing for the past 5 years so there is plenty of room. Im thinking the 10g a year I can save should go into TFSA.
My RRSP’s have been flat or lost money since COVID so how do you figure
You're not alone brother!
One has to wonder if the 'system' is rigged against the middle class stiff?
Now is the time to invest more.
I try to ignore the short term losses or gains. It’s too distracting to observe a brief period of 2-3 years and make assumptions. The next 3 years could result in 30%+ gains (or not) so I find it best to remember the mantra “time in the market” not “timing the market”.
I wish our aging boomer parents were more receptive to these types of conversations. In reality most of us are completely in the dark about our parent’s financial situations with seemingly no way to broach the subject.
Couldn't agree more: my parents refuse to discuss money, but they want to know everything about my business. It's weird - we're all in this together
Not much money in a deadman’s pocket.
RRSP makes even more sense when your employer contributes to it too. But how do you know if you are over contributing?
Your Revenue Canada summary of taxes paid, monies owing, etc., received after you have filed, has a statement (at the bottom of the summary) that informs you the maximum RRSP contribution that you can utilize for the next taxation year.
You can also just log into your online CRA account and see your current contribution limit.
If you have lots of RRSP contribution room and are a high earner should you not max out the RRSP before contributing to a TFSA (including putting your refund into the RRSP)? I have tons of room because of being stupid when I was young. This year I'll put $45K into my RRSP and plan to take out a $70K RRSP top up loan in late Feb. 2024 using LOC to get $70K back as a refund and then I'll pay off the LOC with the refund. Bad idea? For context I'll get 53% back on all $115K contributed due to my income level and have additional deductions which is why I know I'll get the $70K back.
For retiree, income RRSP is not tax efficient compared with income from TFSA, dividends or capital gain. So there is such a thing as too much savings in RRSP. So if you have a good amount of RRSP savings consider to retire early and use RRSP income proceeds to build up TFSA, stock porfolio for dividend income and other capital investments.
Great idea I’ve done this a lot. Just make sure your calculations are spot on.
@@Backtoreality1873to this point I often wait until tax software is available to be able to precisely calculate tax deferred and planned future withdrawals before committing to my annual RSP top up every year. But generally, I end up in the top 53% marginal tax rate each year and expect to be no where near that in retirement.
I can't speak for everyone, but the reason I am single approaching retirement is because gays were not allowed to marry when I was young enough to and in the mating game. Family and society mocked us for existing and that tends to make for a cohort of traumatized, wounded people who now happen to have savings accounts and real estate.