When you should AVOID using an RRSP
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- เผยแพร่เมื่อ 18 ก.พ. 2016
- RRSPs can look very attractive for some people, but can be downright awful for lower-income Canadians. This video explains why. For more information on RRSPs and saving for retirement for low-income Canadians, check out these helpful resources from John Stapleton: openpolicyontario.com/retiring...
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OMG. We've been telling our friends this all along - TFSA is the way to go. Everyone's been pushing us to contribute to an RRSP to which we've always refused. "Just because everyone's doing it doesn't mean we should too", we'd always tell them. Now we can show them this awesome video! Happy to have discovered your channel! Thanks so much!
+SCG Niagara Thanks! I'm glad you found it helpful!
Oh my god, the badass music is so awesome in this video. The choice of music for this video made my day.
Thanks for the help Preet,
Adam
I am getting addicted to this channel. Very informative and explained in fun way. Thumbs up
+Imran Khan Thanks Imran - I appreciate it!
Just stumbled on this. Love the examples. Well done.
Great informative video, thanks for uploading!
Thanks!
Good information explained in a simple and entertaining way.
Great explanation ! Thank you!
You explain it much better than me. Great job. :)
You're good at this. Thanks!
+joe TheBet Hey thanks Joe! I appreciate the encouragement!
One smart cookie. Wish I heard this in my 30s not at retirement now. Keep up the good work.
thanks so much for the great video.thumbs up too.....
+D Gab Thanks!
Just Discovered this channel ! awsome
+Benjamin Franklin Thanks man!
nice explanation, easy to understand
looking forward to your next video!!!
+Info Online Thanks!
That was awesome! thanks :)
Very informative, thank you. It's too bad that those with the lowest income have less incentive to save for later.
Totally rad video. Rock on dude!!
+Zakarea Ali Thanks man!
Generally speaking if you make $30 000+ yearly and plan to do so until the day of your retirement, it's wise to contribute regularly to an RRSP... Assuming it's a lower tax rate when you retire.
good stuff!
does tax rate and tax bracket the same? IRS calculate that I am in the 25% bracket (40000$) does the 3rd scenario is apply to me?
Preet what do you suggest for an individual who is self employed growing their income and PLANS to continue growing wealth through the years to have investments closer to retirement generating $3000/month in passive income via dividends in a TFSA Would RRSP be best to avoid and use a non registered account?.
@Preet: I noticed no clawback was included in Cases 1& 2. Is there an assumption that these income brackets are already non-eligible for OAS?
That's correct. Since OAS clawback doesn't start until roughly $73k, neither a 30% nor 25% marginal rate in retirement would be above that threshold (at least not in Ontario). There might be slight creep into that bracket at a combined 30% rate in another province or territory, but it wouldn't be much.
the link you posted on what qualifies as a low income Canadian is broken.
This video was not confusing enough for me. I was hoping you would do the math that includes the fact that investment income is taxed as capital gains at half the tax rate, whereas an rrsp withdrawal is taxed as a regular income, and would it make sense to transform a capital gains income into a regular income by investing in an rrsp vs investing in a regular account...
hi. if i contributed some money to my rrsp account, but next week changed my mind, can i return my money back without any penalty? Thanks
One saves better for now and better for the long run depending how good you save.
What if you're a lower-income Canadian now, but expect to be in a higher bracket when you retire?
Ikeridge If you're planning on being in a higher tax bracket later in life, then you definitely don't want to defer any tax at all. Pay the low tax now and avoid RRSP's. TFSA would be great to use in your scenario
Jmanbenny what if you marry and put all your money together👀👀
What should be the salary , to consider ourselves in Average Rate, Low Income and High Tax. I mean if someone is earning 40k-60k etc.
How do I know that I am in a high tax rate now that I would be when I get retired? 🤔
why are all examples assuming your income is lower in retirement? is it because if it were the other way you shouldn't use RRSP?
Hi! What is considered as lower-income Canadian? Awesome vids btw!
Hi Yapatooots: generally speaking, with respect to this video, a senior eligible to collect the GIS (guaranteed income supplement), and hence would be subject to clawback of this benefit at 50 cents on the dollar, would be in this group. Detailed information is here: www.esdc.gc.ca/en/cpp/oas/gis/index.page
But as a simple rough answer, someone in the $25,000 range before retirement would be in this category for sure.
Thanks for watching!
In scenario 3, Why is the GIS deductions deducted from the rrsp investment? Aren't they two seperate entities?
Withdrawals from an RRSP (or RRIF) are treated like salary income. GIS is an "income-tested" benefit - meaning the more income you have, the less GIS you get.
Ya but no. The immediate tax savings is present value. Your rrsp amount is future value. So you get $1400 for the rrsp in fv because the 1000 doubled minus 600 for tax. The pv $300 could should also double if invested in a tfsa in the same stock or fund. Now you have 600 and the 1400 for 2000 in fv. Long story short don't ever just compare a pv amt to an fv amt. This strategy works if you are in a lower tax bracket at retirement. If you're in the same tax bracket it's a break even situation if you were to just put the entire 1000 in a tfsa.
I don't believe anything you've said contradicts what's in the video?
Where's your TFSA Video?
Yeah I'll use my time machine future reader to know what tax bracket I'll be in and what the tax rate will actually be! As time goes on I like RRSPs less and less.
Well that's why we should treat RRSP only when we retire and In that case our tax bracket would be as low as possible.
Now if you are thinking of using your RRSP to buy a house or something you should invest that in Mutual funds with lower risk in a tax free saving account.
It's a betting game. Use averages to your advantage. If your tax rate now is higher than historical figures due to higher than normal national debt, or because the people in Government aren't as fiscally conservative leading to higher tax needs, then it is a good bet that later on tax rates will be lower than they are now (though not guaranteed).
Yeah bad advise Mutual Funds are crap. Most don't earn what they show you and MER are over 2% plus if there's dividends they are taxed from US companies. The regular folk will see 6% return but they will most likely get 3% on a good year or even 2% back to a GIC basically with taking risk in Mutual Funds where most idiots at banks just don't manage nothing for you just wanna sell. Better spend some time invest in your own equities and create your own little Mutual Fund and try some good ETF's.
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You left out the scenario where the tax rate is higher in retirement than it was during earning years. I think this happens more than you would think.
thought it was lower
Very rare higher unless you earn more than working years because you have max CPP & OAS, a great company or public pension and possibly even extra income from interest or usually rental income than yeah you will be taxed but tax free threshold increases at retirement to basically $35,000 roughly combined with spouse vs $22,000 in working years combined. Plus you have multiple claw backs. So no for most Canadians it's significantly lower unless you are in the top 5% even in retirement.
@@eurosensazion Do you have an article you can point to that goes more in depth on this?
so how do you figure out if you're taxes are high now? and do you just hope down the road that your taxes will be lower making you profit?
Adrian Moreino Nobody wants to think that, when they will be in retirement, they will have a low income. So theoretically they should put money in their RRSP. But life being what it is, they could realize that they will be taxed 80% because of their lost of the GIS
RRSP is a giant tax grab by government, simple as that. If your self-employed or work for a company with no benefits then all these sound good but what good is it when you know you will not have a stable income or a lousy pension working for 47 years work which is to get max OAS. If you worked with minimum 40 years at maximum annual pensionable earnings, you still get a lousy 1700 a month CPP + OAS. RRSP's would be good only if GIC's were 4%+ to have a multiplier effect of at least x2 with 25 years contributions. Self-Employed are the biggest screwed if not making 6 digits because you pay an additional 10% on CPP contributions and can never claim EI EVER. These are all designed with the theory for unionized salary workers with additional public/government pension contributions to be useful.
What if your employer helps contribute?. For every $100 dollars I contribute they match 50%. Monthly I put $200 towards RRSP and they add $100.
Haha nm just came across your video of employer contributions
why would someone buy rrsp to get taxed again when they get taxed when they get their paycheck this rrsp doesnt make any sense or am i missing something can someone explain it thanks
When you file your income tax, you can deduct the RRSP contribution amount from your taxable income. This usually means you will end up paying less taxes. The other aspect of RRSP this video does not cover is that capital gains and dividends are not taxed, but in a regular investment account, those will be taxed
I'm sorry, I'm starting to study this subject now... How can your tax rate decrease after retirement? Isn't that proporcional to your income? To conceive that I will reduce my tax rate in the future I must presume that I will retire with a lower income in comparison to the income that I have now?
You’re on the right track. Taxes are progressive - the higher the income, the higher the tax rate. And most people will retire and have less taxable income per year in retirement, and so their income tax rate will be lower. It is possible that some people will have the same level of income or higher, but that is rare.
@@PreetBanerjee Thank you!!
Good info but the background sounds are extremely distracting and made it difficult to listen and concentrate on the points you were making. I kept wanting to turn it off.
Tldr if you're low income don't contribute to rrsp
Oversimplified that it did actually make rrsp look bad.
Did he use a crayon to make that beard shadow? Lol
over $45,282 up to $90,563 20.5% 10.25%
over $90,563 up to $140,388 26.0% 13.00%
over $140,388 up to $200,000 29.0% 14.50%
why do you say the taxes could be 40% is that for the idea of easy calculations for the videos purposes? or are their even more taxes that I don't know about,?
Combined Federal and Provincial taxes are around 50% (in Canada).
You can ignore this video if you're not Canadian. I'm moving all Canadian specific content to a Canadian focused channel. Going forward it will be more globally focused topics that are not country specific (unless it's the US)
I really don't like taxes now haha. Thats just unbelievable. I have been studying on my own recently using the Investment funds in Canada course. I thank you for your reply.
What is this channel called? I'm Canadian and would like to learn more.
th-cam.com/channels/PW3tAKJzWvAiA6KTv83Dfw.html
Scenario number seven you get hit by a bus
Man, the poor just get screwed.
U r very complicated
I didn’t understand
need a video on whats a TFSA