An RRSP can allow you to save for retirement on an effectively tax\u002Dfree basis, and no, that\u0027s not a typo, says Jamie Golombek. Find out more
For decades, some readers have tried to convince me that RRSP investment income is merely tax deferred since you must pay tax on the funds when they are withdrawn from the RRSP, or, ultimately, from its successor, the registered retirement income fund .
Let’s start with a basic example. Sarah has three choices when it comes to investing $1,000 of her 2023 employment income for her retirement: a TFSA, an RRSP or a non-registered investment account. Her 2023 marginal tax rate is 30 per cent, and she expects to be able to generate an annual rate of return of five per cent on her investments.
Both an RRSP and TFSA will beat a non-registered account if your tax rate today is the same as the tax rate in the future.Applying the same annual rate of return of five per cent over the next 20 years, with no annual taxation, Sarah will be able to accumulate an RRSP worth $2,653. But, alas, not all the RRSP funds are hers to spend. The piper must be paid.
Now, if Sarah instead invests that $1,000 in a non-registered investment account, she will first need to pay tax, leaving her with $700 to invest. If this $700 earns five-per-cent income annually that’s taxed at a rate of 30 per cent, her non-registered account at the end of 20 years will be worth only $1,393 — significantly less than the $1,857 in her TFSA or RRSP.
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Here's why investing in an RRSP does make sense for many CanadiansAn RRSP can allow you to save for retirement on an effectively tax\u002Dfree basis, and no, that\u0027s not a typo, says Jamie Golombek. Find out more
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Here's why investing in an RRSP does make sense for many CanadiansAn RRSP can allow you to save for retirement on an effectively tax\u002Dfree basis, and no, that\u0027s not a typo, says Jamie Golombek. Find out more
اقرأ أكثر »
Here's why investing in an RRSP does make sense for many CanadiansAn RRSP can allow you to save for retirement on an effectively tax\u002Dfree basis, and no, that\u0027s not a typo, says Jamie Golombek. Find out more
اقرأ أكثر »
Here's why investing in an RRSP does make sense for many CanadiansAn RRSP can allow you to save for retirement on an effectively tax\u002Dfree basis, and no, that\u0027s not a typo, says Jamie Golombek. Find out more
اقرأ أكثر »
Here's why investing in an RRSP does make sense for many CanadiansAn RRSP can allow you to save for retirement on an effectively tax\u002Dfree basis, and no, that\u0027s not a typo, says Jamie Golombek. Find out more
اقرأ أكثر »
Here's why investing in an RRSP does make sense for many CanadiansAn RRSP can allow you to save for retirement on an effectively tax\u002Dfree basis, and no, that\u0027s not a typo, says Jamie Golombek. Find out more
اقرأ أكثر »