Most people know the basics about contributing to RRSPs but there are a number of lesser known aspects that can help you save for retirement and manage your taxes. Tannis Dawson, High Net Worth Planner, TD Wealth, explains what you have to keep in mind before the RRSP deadline.
Print Transcript
00:00:00.000 [MUSIC PLAYING]
00:00:02.420
00:00:04.360 Welcome back.
00:00:05.050 The RRSP contribution deadline is up at the end of the month, and most of you
00:00:08.710 likely already know the basics of RRSPs, including
00:00:12.250 they are a tax-deferred investment.
00:00:15.120 Your contribution limits are calculated at 18% of your annual income, up to a maximum.
00:00:20.560 And you can borrow from your RRSP to buy a home.
00:00:23.032 But my next guest says there are probably a whole lot
00:00:25.240 of things you don't know about RRSPs.
00:00:28.150 I spoke earlier with Tannis Dawson.
00:00:29.890 She's a high net worth and business succession planner at TD Wealth.
00:00:33.280 And she helped us separate fact from fiction.
00:00:36.010 Have a listen.
00:00:37.640 Tannis, we're gonna play a little bit of true and false here.
00:00:40.940 So, first question.
00:00:42.230 If you have a big chunk of money, maybe from a bonus or maybe some savings that you've
00:00:46.910 been saving up the past little while, should you automatically put it into an RRSP?
00:00:51.620 True or false?
00:00:53.170 False.
00:00:54.170 That is not a standard thing.
00:00:55.910 You need to talk to your adviser and see what your marginal tax rate is
00:00:59.510 now versus what it might be in retirement.
00:01:02.330 When you're looking to see, you want to make sure
00:01:04.459 that you're not gonna pay more tax in retirement than you're saving right now.
00:01:08.390 Since TFSAs came in, they are a good vehicle that sometimes,
00:01:12.050 for lower income earners, that it might make more sense to put your money into a TFSA,
00:01:16.860 because now the money earned in there is totally tax-free,
00:01:21.200 instead of when you're pulling out in retirement
00:01:23.660 and it's being taxed at a higher tax rate, and maybe even affecting your OAS clawback.
00:01:30.420 OK.
00:01:30.920 Let's go to the next one.
00:01:32.390 If you're married, you should always put your money into your RRSP first,
00:01:37.310 before contributing to a spousal RRSP.
00:01:40.400 True or false?
00:01:42.420 False.
00:01:42.920 Again, you want to look and see what you estimate your retirement
00:01:46.910 income to look like.
00:01:48.290 If there is a lower income spouse and that doesn't have as much retirement assets that
00:01:53.450 might be coming into income, then you want to maybe do
00:01:57.100 a spousal RRSP so that they can have income in retirement more equally with yours.
00:02:03.890 When pension income splitting came in, some people
00:02:07.070 thought spousal RRSPs were not as important.
00:02:09.199 But if you're going to access your RRSP before age 65,
00:02:13.070 you won't have access to the pension income splitting,
00:02:15.350 and you really want to look to see and try to minimize that tax.
00:02:18.631 Great.
00:02:19.130 You're a positive font of information.
00:02:20.770 Let's keep going here.
00:02:21.980 If I contribute to my RRSP this year, I can wait and claim the deduction next year.
00:02:28.850 Is that true or false?
00:02:30.560 True.
00:02:31.620 You can make a contribution to an RRSP, but not
00:02:34.160 necessarily take the deduction in that year.
00:02:36.800 But if you're not going to take the deduction and you haven't maxed out your TFSA,
00:02:40.670 you really want to look at seeing maybe if TFSA is better,
00:02:43.370 because your investment growth will be tax-free
00:02:47.000 instead of being tax-deferred in the RRSP.
00:02:49.190 And then just make the contribution into the RRSP
00:02:51.680 when you're going to take the deduction.
00:02:53.510 How about this one.
00:02:54.860 You can put all sorts of different assets into your RRSP.
00:02:57.800 True or false?
00:02:59.720 Yes, you can transfer in kind.
00:03:01.380 So if you have investments already in your non-reg,
00:03:04.490 you can transfer those assets into your RRSP if you don't have cash available.
00:03:09.896 Just remembering that if there are capital gain on those investments,
00:03:12.770 you're gonna pay tax on it, the same as with TFSA.
00:03:15.590 You can take investments out of a TFSA and transfer those in kind to your RRSP.
00:03:20.000 So if you like those stocks and you don't want to sell it, you can transfer in kind.
00:03:23.780 Just be careful if, in your non-reg, that you have an asset in a loss position,
00:03:30.530 that you will not be able to use that capital loss.
00:03:33.320 You're better off selling that investment, and then transferring the cash.
00:03:36.650 Yep.
00:03:36.860 Yep.
00:03:37.040 Good advice on that front.
00:03:38.123 So, we're done our true and false.
00:03:39.840 But let me ask you, are there some other things
00:03:41.798 that people need to keep in mind at this time of year
00:03:44.949 before putting money into their RRSP?
00:03:46.490 What are the kinds of things that you like to have people think about?
00:03:49.406 One is a good reminder if you're talking to your adviser
00:03:51.860 and looking to see who the beneficiary is of your RRSP.
00:03:55.010 People maybe have set up an RRSP when they were young, and maybe put a parent
00:03:58.820 and got married.
00:03:59.630 And is that beneficiary the person that you want?
00:04:02.900 Did they get remarried?
00:04:05.540 And looking to make sure that that beneficiary
00:04:07.490 is who you want the money to go to.
00:04:10.160 Otherwise, whoever is named on that RRSP, or if you passed away,
00:04:13.430 that money will go to that beneficiary.
00:04:16.459 Two is you can over-contribute by $2,000 to an RRSP.
00:04:20.510 But if you haven't maxed out your TFSA, it might be better to put your money there.
00:04:25.402 Another thing to remember is, if you are still working and have earned income
00:04:28.610 and you're past age 71, you can also do a spousal RRSP if your spouse is younger,
00:04:34.100 and use their room.
00:04:35.390 So-- use your room for the spousal RRSP, so even
00:04:39.290 though it doesn't show up on your notice of assessment, you do have room.
00:04:42.840 You just have to phone CRA and ask.
00:04:44.810 Fantastic insight, Tannis.
00:04:46.520 Thanks so much.
00:04:47.630 You're welcome.
00:04:49.040 Tannis Dawson, high net worth planner and business succession planner from TD Wealth.
00:04:53.450 And she joined us from Manitoba.
00:04:56.292 Now, if you want to watch this video, I'm gonna
00:04:58.250 tell you to a place you can go to watch it.
00:05:00.041 Go to moneytalkgo.com/life.
00:05:05.060 Click on that.
00:05:05.660 You're gonna find this video, plus a whole bunch of other stuff.
00:05:08.390 We've got some great articles about all sorts of things,
00:05:10.760 about everything from being a landlord to what happens
00:05:13.940 when your kids want to get the cottage.
00:05:15.800 Lots of great categories.
00:05:17.090 Everything about retirement, marriage, divorce,
00:05:20.510 how to split up assets within a family.
00:05:22.337 Here's something-- an article we did about the family bargain.
00:05:24.920 Again, great information on things you need to understand about things
00:05:28.837 that are happening in your life.
00:05:30.170 Once again, moneytalkgo.com/life.
00:05:33.650 [MUSIC PLAYING]
00:05:37.000
00:00:00.000 [MUSIC PLAYING]
00:00:02.420
00:00:04.360 Welcome back.
00:00:05.050 The RRSP contribution deadline is up at the end of the month, and most of you
00:00:08.710 likely already know the basics of RRSPs, including
00:00:12.250 they are a tax-deferred investment.
00:00:15.120 Your contribution limits are calculated at 18% of your annual income, up to a maximum.
00:00:20.560 And you can borrow from your RRSP to buy a home.
00:00:23.032 But my next guest says there are probably a whole lot
00:00:25.240 of things you don't know about RRSPs.
00:00:28.150 I spoke earlier with Tannis Dawson.
00:00:29.890 She's a high net worth and business succession planner at TD Wealth.
00:00:33.280 And she helped us separate fact from fiction.
00:00:36.010 Have a listen.
00:00:37.640 Tannis, we're gonna play a little bit of true and false here.
00:00:40.940 So, first question.
00:00:42.230 If you have a big chunk of money, maybe from a bonus or maybe some savings that you've
00:00:46.910 been saving up the past little while, should you automatically put it into an RRSP?
00:00:51.620 True or false?
00:00:53.170 False.
00:00:54.170 That is not a standard thing.
00:00:55.910 You need to talk to your adviser and see what your marginal tax rate is
00:00:59.510 now versus what it might be in retirement.
00:01:02.330 When you're looking to see, you want to make sure
00:01:04.459 that you're not gonna pay more tax in retirement than you're saving right now.
00:01:08.390 Since TFSAs came in, they are a good vehicle that sometimes,
00:01:12.050 for lower income earners, that it might make more sense to put your money into a TFSA,
00:01:16.860 because now the money earned in there is totally tax-free,
00:01:21.200 instead of when you're pulling out in retirement
00:01:23.660 and it's being taxed at a higher tax rate, and maybe even affecting your OAS clawback.
00:01:30.420 OK.
00:01:30.920 Let's go to the next one.
00:01:32.390 If you're married, you should always put your money into your RRSP first,
00:01:37.310 before contributing to a spousal RRSP.
00:01:40.400 True or false?
00:01:42.420 False.
00:01:42.920 Again, you want to look and see what you estimate your retirement
00:01:46.910 income to look like.
00:01:48.290 If there is a lower income spouse and that doesn't have as much retirement assets that
00:01:53.450 might be coming into income, then you want to maybe do
00:01:57.100 a spousal RRSP so that they can have income in retirement more equally with yours.
00:02:03.890 When pension income splitting came in, some people
00:02:07.070 thought spousal RRSPs were not as important.
00:02:09.199 But if you're going to access your RRSP before age 65,
00:02:13.070 you won't have access to the pension income splitting,
00:02:15.350 and you really want to look to see and try to minimize that tax.
00:02:18.631 Great.
00:02:19.130 You're a positive font of information.
00:02:20.770 Let's keep going here.
00:02:21.980 If I contribute to my RRSP this year, I can wait and claim the deduction next year.
00:02:28.850 Is that true or false?
00:02:30.560 True.
00:02:31.620 You can make a contribution to an RRSP, but not
00:02:34.160 necessarily take the deduction in that year.
00:02:36.800 But if you're not going to take the deduction and you haven't maxed out your TFSA,
00:02:40.670 you really want to look at seeing maybe if TFSA is better,
00:02:43.370 because your investment growth will be tax-free
00:02:47.000 instead of being tax-deferred in the RRSP.
00:02:49.190 And then just make the contribution into the RRSP
00:02:51.680 when you're going to take the deduction.
00:02:53.510 How about this one.
00:02:54.860 You can put all sorts of different assets into your RRSP.
00:02:57.800 True or false?
00:02:59.720 Yes, you can transfer in kind.
00:03:01.380 So if you have investments already in your non-reg,
00:03:04.490 you can transfer those assets into your RRSP if you don't have cash available.
00:03:09.896 Just remembering that if there are capital gain on those investments,
00:03:12.770 you're gonna pay tax on it, the same as with TFSA.
00:03:15.590 You can take investments out of a TFSA and transfer those in kind to your RRSP.
00:03:20.000 So if you like those stocks and you don't want to sell it, you can transfer in kind.
00:03:23.780 Just be careful if, in your non-reg, that you have an asset in a loss position,
00:03:30.530 that you will not be able to use that capital loss.
00:03:33.320 You're better off selling that investment, and then transferring the cash.
00:03:36.650 Yep.
00:03:36.860 Yep.
00:03:37.040 Good advice on that front.
00:03:38.123 So, we're done our true and false.
00:03:39.840 But let me ask you, are there some other things
00:03:41.798 that people need to keep in mind at this time of year
00:03:44.949 before putting money into their RRSP?
00:03:46.490 What are the kinds of things that you like to have people think about?
00:03:49.406 One is a good reminder if you're talking to your adviser
00:03:51.860 and looking to see who the beneficiary is of your RRSP.
00:03:55.010 People maybe have set up an RRSP when they were young, and maybe put a parent
00:03:58.820 and got married.
00:03:59.630 And is that beneficiary the person that you want?
00:04:02.900 Did they get remarried?
00:04:05.540 And looking to make sure that that beneficiary
00:04:07.490 is who you want the money to go to.
00:04:10.160 Otherwise, whoever is named on that RRSP, or if you passed away,
00:04:13.430 that money will go to that beneficiary.
00:04:16.459 Two is you can over-contribute by $2,000 to an RRSP.
00:04:20.510 But if you haven't maxed out your TFSA, it might be better to put your money there.
00:04:25.402 Another thing to remember is, if you are still working and have earned income
00:04:28.610 and you're past age 71, you can also do a spousal RRSP if your spouse is younger,
00:04:34.100 and use their room.
00:04:35.390 So-- use your room for the spousal RRSP, so even
00:04:39.290 though it doesn't show up on your notice of assessment, you do have room.
00:04:42.840 You just have to phone CRA and ask.
00:04:44.810 Fantastic insight, Tannis.
00:04:46.520 Thanks so much.
00:04:47.630 You're welcome.
00:04:49.040 Tannis Dawson, high net worth planner and business succession planner from TD Wealth.
00:04:53.450 And she joined us from Manitoba.
00:04:56.292 Now, if you want to watch this video, I'm gonna
00:04:58.250 tell you to a place you can go to watch it.
00:05:00.041 Go to moneytalkgo.com/life.
00:05:05.060 Click on that.
00:05:05.660 You're gonna find this video, plus a whole bunch of other stuff.
00:05:08.390 We've got some great articles about all sorts of things,
00:05:10.760 about everything from being a landlord to what happens
00:05:13.940 when your kids want to get the cottage.
00:05:15.800 Lots of great categories.
00:05:17.090 Everything about retirement, marriage, divorce,
00:05:20.510 how to split up assets within a family.
00:05:22.337 Here's something-- an article we did about the family bargain.
00:05:24.920 Again, great information on things you need to understand about things
00:05:28.837 that are happening in your life.
00:05:30.170 Once again, moneytalkgo.com/life.
00:05:33.650 [MUSIC PLAYING]
00:05:37.000