Why You Should Stop Contributing to Your Personal RRSP

williamchan • 21 February 2024

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Prioritizing Your RRSP Over Other Financial Priorities Can be Costly

Duplicate ask an expert for Registered Retirement Savings plan. How it impacts taxes, estate planning, and other savings

Many people rush into making a RRSP contribution during the "first 60 day" window each year in hopes of getting a refund on their taxes or avoid owing the government money.  I was recently interviewed for a Globe and Mail article and mentioned a few of the items below.  There's a big marketing push to have people make deposits and even make loans to do so.  However, is making a personal RRSP the right move.  Here are a few things to consider:
  • ·Are you properly using your workplace plan throughout the year?
  • Maximize your RRSP employer matching contributions from work first
  • Applying a bonus directly to a RRSP from your employer
  • Are you improperly prioritizing a RRSP contribution OVER debt or other financial needs.
  • Pay down debt vs making a contribution.
  • If a RRSP loan is needed, why? And considering the repayment timeline, is it worth the cost?
  • Is cashflow better served elsewhere? Setting an emergency fund? Other accounts or products?
  • ·Are you OVER SAVING in your RRSP?
  • Are you on a defined benefit pension plan? 
  • OAS “claw back”, GIS if low income.  You may be losing out on government income
  • Your projected retirement income is estimated to be higher than current/past employment income.
  • Estate taxes upon death
  • ·Do alternative accounts with other benefits make more sense?
  • If you don’t own a home, the First Home Savings Account should be your new number one option.
  • Will not apply when filing your 2023 tax return since it doesn’t have the first 60 days contribution benefit.
  • A Registered Education Savings plan can offer government grants AND be more attractive to lower income individuals who can receive additional grant enhancements.
  • Tax Free Savings Accounts offer greater accessibility to your money and tax-free gains.
  • Registered Disability Savings Plans for those who qualify, will receive better value from deposits through grants and other government support.

Many people manage their finances from a transactional perspective, opening an account, making a deposit, purchasing a product, but it's usually not the most effective way to approach your finances.  Speaking with a professional can really help save thousands of dollars that would have been lost otherwise.  Tax planning, costs savings, product comparisons are just a few things we can help with.

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