Why an RRSP is a bad idea (for most people)

Today we cover why I believe RRSPs are bad... for most people.

Disclaimer: The information presented in these YouTube videos are intended for informational and education purposes only. I am not a certified financial planner or an insurance professional. If you decide to implement any of the strategies you should consult a financial professional and rely on their advice and guidance.

[victorsalomonz]

If you're fortunate enough to accumulate a large amount into your rrsp but unfortunate enough so that you and your spouse die young, all that money gets taxed at once. Makes me wanna vomit.

[YKW]

The RRSP is not a tax shelter; it's a tax deferral shelter, and the account should be used with caution. I don't like the idea of tax deferral. I would rather put my money in TFSA, HISA, and Life Insurance.

[enjoythedreamlife]

You don't get a Tax Credit 15% for an RRSP, you get a Tax Deduction your marginal tax Rate ie 40%. Big Difference. We don't know tax Rates in the future. Government can impose a higher Tax Rate for Capital Gains from 50% to 75%. You get a tax deduction and reinvest theRefund. $5000 RSP 40% Tax Rate = $2, 000 refund. If you pay the Tax from $5000 you now have only $3, 000 to invest in TFSA. You see $7, 000 vs $3, 000. In an RRSP you can buy and sell without incurring Capital Gains and Losses. In a Margin account you will and can shrink your investment. Most people that dont consistently invest in an RRSP are broke at retirement. Why do you think CRA raised premiums on CPP and higher payout 33% in 25 years. For that one reason people not saving enough. Do you want me to go on, first time home buyers can save for a DP faster and have more

[vannasoukphilavong]

It’s important to do your Rrsp, you’ll needed when you retire, it depends on the funds that you invested, it will generate you income. For example If I have $1 million dollars it generates me 100k, of course I’ll pay the taxes of that 100k

[BelAche-]

In many cases having an RRSP is the only way to claim the Pension Income Tax credit $2000/yr. unless you have a company or government pension you will not qualify, OAS and CPP do not count.

[AxeCheeks]

Just build up a tfsa as best you can and take as little money out of your rrsp as you need when retired. Try living mostly off your tfsa while continuing to invest with it also. Its all a game, try and play it best as possible.

[Rev.DavidJTowns]

invest elsewhere! When you withdraw money from your RRSP, it will be taxed as income, and a withholding tax will apply at the time of the withdrawal 30%. You must include the amount you withdraw on your tax return as part of your total income for the year. This will probably increase the amount of income tax you must pay. When will politicians get their hands out of the pockets of hard-working Canadians? Highest income in modern countries worldwide, carbon taxes, HST imagine taxing items over and over again and getting away with it? and for what? high inflation, poor infrastructure, and less freedoms? Canadians want reduced income taxes and they want to use their hard-earned income for their future. GOD Bless

[TrollLulCats]

this is idiotic, especially if your marginal rate is high (50%+) it is a certainty that when you retire and will be making less money you will have a lower tax rate. Not to mention the gains you have on the tax credit over the years. Only time an rrsp is a bad idea is if you expect your income to rapidly increase and you want to save contribution room for a higher credit %

[crhayes]

I agree that in certain scenarios an RRSP may not be the best choice. However, I disagree with the argument regarding taxes, though there are two components in my view:

1) The tax rates and marginal tax brackets set forth by the goverment
2) Your personal tax liability depending on your own income/wealth etc.

I agree that we should work with known risks, and avoid unknown risks, though in my mind we should focus on things that are in our control; #1 is out of our control while #2 is largely within our control (influenced by our behaviour, work ethic, skills, value in the market etc.).

I personally don't worry about #1, because I don't believe changes to these rates/brackets will be large enough to cause a material difference to my future wealth. Brackets are indexed to inflation, and tax rates are already very high. The government already takes more than half your money in the top tax bracket and I can't imagine them getting away with taking much more. But, who knows? And to your point, this is speculation on my part.

I would be concerned more with #2. If you are fairly certain your income will not increase substantially over your life, whether because you do unskilled work, or don't want to advance the corporate ladder, or have already hit a ceiling in your field, then you can be fairly sure you're not going to have a higher tax rate during retirement. If you work in a job with large salary growth potential (Doctor, Engineer, Lawyer, etc.) or you are an entrepreneur, it's much harder to anticipate the upper bounds of your wealth, and therefore the tax implications, come retirement.