What You Don’t Know About RRSPs Could Hurt You

[MUSIC PLAYING] Welcome back. The RRSP contribution deadline is up at the end of the month, and most of you likely already know the basics of RRSPs, including they are a tax-deferred investment. Your contribution limits are calculated at 18% of your annual income, up to a maximum. And you can borrow from your RRSP to buy a home. But my next guest says there are probably a whole lot of things you don't know about RRSPs. I spoke earlier with Tannis Dawson. She's a high net worth and business succession planner at TD Wealth. And she helped us separate fact from fiction. Have a listen. Tannis, we're gonna play a little bit of true and false here. So, first question. If you have a big chunk of money, maybe from a bonus or maybe some savings that you've been saving up the past little while, should you automatically put it into an RRSP? True or false? False. That is not a standard thing. You need to talk to your adviser and see what your marginal tax rate is now versus what it might be in retirement. When you're looking to see, you want to make sure that you're not gonna pay more tax in retirement than you're saving right now. Since TFSAs came in, they are a good vehicle that sometimes, for lower income earners, that it might make more sense to put your money into a TFSA, because now the money earned in there is totally tax-free, instead of when you're pulling out in retirement and it's being taxed at a higher tax rate, and maybe even affecting your OAS clawback. OK. Let's go to the next one. If you're married, you should always put your money into your RRSP first, before contributing to a spousal RRSP. True or false? False. Again, you want to look and see what you estimate your retirement income to look like. If there is a lower income spouse and that doesn't have as much retirement assets that might be coming into income, then you want to maybe do a spousal RRSP so that they can have income in retirement more equally with yours. When pension income splitting came in, some people thought spousal RRSPs were not as important. But if you're going to access your RRSP before age 65, you won't have access to the pension income splitting, and you really want to look to see and try to minimize that tax. Great. You're a positive font of information. Let's keep going here. If I contribute to my RRSP this year, I can wait and claim the deduction next year. Is that true or false? True. You can make a contribution to an RRSP, but not necessarily take the deduction in that year. But if you're not going to take the deduction and you haven't maxed out your TFSA, you really want to look at seeing maybe if TFSA is better, because your investment growth will be tax-free instead of being tax-deferred in the RRSP. And then just make the contribution into the RRSP when you're going to take the deduction. How about this one. You can put all sorts of different assets into your RRSP. True or false? Yes, you can transfer in kind. So if you have investments already in your non-reg, you can transfer those assets into your RRSP if you don't have cash available. Just remembering that if there are capital gain on those investments, you're gonna pay tax on it, the same as with TFSA. You can take investments out of a TFSA and transfer those in kind to your RRSP. So if you like those stocks and you don't want to sell it, you can transfer in kind. Just be careful if, in your non-reg, that you have an asset in a loss position, that you will not be able to use that capital loss. You're better off selling that investment, and then transferring the cash. Yep. Yep. Good advice on that front. So, we're done our true and false. But let me ask you, are there some other things that people need to keep in mind at this time of year before putting money into their RRSP? What are the kinds of things that you like to have people think about? One is a good reminder if you're talking to your adviser and looking to see who the beneficiary is of your RRSP. People maybe have set up an RRSP when they were young, and maybe put a parent and got married. And is that beneficiary the person that you want? Did they get remarried? And looking to make sure that that beneficiary is who you want the money to go to. Otherwise, whoever is named on that RRSP, or if you passed away, that money will go to that beneficiary. Two is you can over-contribute by $2,000 to an RRSP. But if you haven't maxed out your TFSA, it might be better to put your money there. Another thing to remember is, if you are still working and have earned income and you're past age 71, you can also do a spousal RRSP if your spouse is younger, and use their room. So-- use your room for the spousal RRSP, so even though it doesn't show up on your notice of assessment, you do have room. You just have to phone CRA and ask. Fantastic insight, Tannis. Thanks so much. You're welcome. Tannis Dawson, high net worth planner and business succession planner from TD Wealth. And she joined us from Manitoba. Now, if you want to watch this video, I'm gonna tell you to a place you can go to watch it. Go to moneytalkgo.com/life. Click on that. You're gonna find this video, plus a whole bunch of other stuff. We've got some great articles about all sorts of things, about everything from being a landlord to what happens when your kids want to get the cottage. Lots of great categories. Everything about retirement, marriage, divorce, how to split up assets within a family. Here's something-- an article we did about the family bargain. Again, great information on things you need to understand about things that are happening in your life. Once again, moneytalkgo.com/life.

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