By Jonathan Chevreau

While Canada’s Registered Retirement Savings Plans (RRSP) program is 60 years old (it was launched in 1957), it tends to be underused, because its very success has spawned multiple myths about it.

The misapprehensions come chiefly from two sources. One is seniors who have finally entered the de-accumulation (aka decumulation) phase of their lives, and realize with a shock that all those tax refunds they enjoyed from decades of RRSP contributions have come home to roost with forced annual – and taxable – withdrawals.

That, of course, occurs after the year you turn 71, when seniors are required either to annuitize their RRSP, collapse it and pay tax, or (the most common choice) convert it to a Registered Retirement Income Fund, or RRIF.

And the other source of confusion about the merits or lack of same of RRSPs? Ah, that comes from young people, who are rightly enamored with the much newer alternative known as the Tax-Free Savings Accounts, or TFSAs.

TFSAs were launched in January 2009 (that is, you could put money in a TFSA as of Jan. 1, 2009, a day I vividly recall because that’s precisely what my wife and I did that day, to the max.)

Younger investors – yes, Millennials – are fortunate that the TFSA came along just in time for them. I know because that fateful day in 2009, we also started to fund our now-26-year-old daughter’s TFSA. Because we invested more aggressively to suit her longer time horizon, her TFSA is now “beating” those of her parents!

So how does the TFSA affect perceptions of the RRSP? Well, those same seniors who are now vexed by having to pay tax on annual withdrawals would well appreciate it if a fairy godmother could wave a magic wand and instantly transform their RRSPs into TFSAs with similar balances. That way, withdrawals would never be taxed.

Consider this: $100,000 in an RRSP probably means Ottawa has dibs on anywhere from $25,000 to $40,000 of it, while it will have no claim on a $100,000 TFSA. In that way, it’s quite true that a $100,000 TFSA is more valuable than a $100,000 RRSP.

And, while we’re on the subject, you could also argue that $100,000 in a TFSA is more valuable than $100,000 in non-registered investments, but that the $100,000 non-registered is more valuable than the $100,000 in the RRSP.

However, this analysis fails to account for the value of those RRSP refunds all those years – refunds that either got spent on all manner of pleasant things, or were reinvested perhaps into non-registered investments or a TFSA.

And here, it’s necessary to acknowledge the excellent work of Jamie Golombek, who released a study on six RRSP myths. Golombek is Managing Director, Tax & Estate Planning for CIBC Financial Planning and Advice.

We’ll look at all of Golombek’s six myths in more detail this report, but we have also consulted with several other experts, who have furnished us with five additional RRSP myths. We’ll also add three other myths, but Golombek’s list is the definitive place to start.

Falling out of favour? Unused RRSP room now passes $1 trillion

Despite the RRSP program’s longevity, Golombek acknowledges they “seem to have fallen out of favour.” Between 2000 and 2013, the total value of RRSP contributions from individuals aged 25 to 54 dropped 26%, he estimates. By 2015, unused RRSP contribution room exceeded a whopping $1 trillion!

Not only are fewer younger workers contributing, but even older investors who have used them for years are also starting to withdraw funds from them, well before age 71. I and other writers have described how RRSP drawdown (or meltdown) strategies may make sense in one’s 60s, assuming you or your spouse are in a lower tax bracket post-full-time employment.

But the very fact that there’s a valid tax reason to withdraw funds in a low tax bracket is actually evidence of the value of the RRSP. Meltdowns can work because the original contributions would have been made when the worker was in a high tax bracket.

These days, the highest-income workers have a top marginal tax rate of more than 50% in some provinces. So if an RRSP contribution nets you a big refund, and results in paying lower taxes at the time of contribution, withdrawing the funds when you’re a pre-retiree in a 20% or 25% tax bracket constitutes a double win.

Adrian Mastracci, a portfolio manager with Vancouver-based Lycos Asset Management Inc., says that when you consider both RRSPs and the RRIFs they often become, the two combined involve a very long time horizon of at least six decades (from age 30 to one’s 90s).

In fact, if you did as most experts recommend and got started in your early 20s, you could well be talking about seven or even eight decades. Over such a long haul, myths and emotions get in the way of prudent investing practice, Mastracci argues.

Without proper guidance, individual investors tend to get lost in the minutae of individual accounts and fail to take a “total portfolio” approach to their investments.

If not an RRSP, then what?

What the anti-RRSP crowd doesn’t articulate: What exactly is better than an RRSP contribution?

A TFSA does make sense if you’re debt-free, earning an income in a low tax bracket, and expect one day to be in a higher one. But Canadians in the top tax bracket have almost five times more room in the RRSP ($26,230 in 2018), compared to the current $5,500 TFSA limit.

Yes, its contribution room may be slowly hiked with inflation, but that’s only happened once in the TFSA’s 10-year history, and it was a modest $500 increase.

(The Harper government did double the room in 2015 to $10,000, but that was not an inflation adjustment, and it was later revoked by Justin Trudeau’s Liberal administration.)

RRSPs are certainly better tax-wise than saving in non-registered accounts, which have to be funded with income net of income tax, and then subject you to annual rounds of taxation on interest and dividends, plus any realized net capital gains. That’s a double tax hit, which is why I like to say that TFSAs help avoid unfair double taxation.

As with non-registered investments, you fund TFSAs with capital that might already been taxed as income. But unlike non-registered investments, subsequent TFSA investment income is not taxed.

Certainly, an employer pension plan is a nice place to save money, especially if you’re fortunate enough to have an employer with a Defined Benefit (DB) pension. Outside the public sector, however, those are becoming increasingly rare.

Besides, the better the DB pension, the higher the Pension Adjustment (PA) that will show on your T-4 slip, which will curtail the amount of contribution room in your RRSP.

Golombek notes that government pensions will provide a baseline income in retirement: a maximum of $13,610 from the Canada Pension Plan (CPP) for those who retire at the normal retirement age of 65 (you can get more by waiting till 70).

However, not everyone earns enough to get the maximum CPP; on average, CPP pays out just $7,700, Golombek says. That’s not much more than the maximum $7,040 paid out by Old Age Security (OAS), and only the most impecunious seniors will even qualify for the Guaranteed Income Supplement (GIS), which is worth $10,515 a year (tax-free!).

All those sources may amount to $30,000 for an individual or $60,000 for a couple. That’s a big foundation for retirement, but anyone who wants to live large will need to supplement that with personal savings. And that’s where the RRSP comes in.

A CIBC poll shows that on average, individual Canadians expect they’ll need to save up a nest egg worth $756,000 to generate a “comfortable” retirement. However, CIBC also found 35% of respondents aged 55 or older hadn’t even begun to save for retirement.

That’s shocking, and you have to assume it’s because they fell for one or more of the following eleven RRSP myths.

Let’s start with the biggest one.

This seems to be the most “popular” RRSP myth, if you judge by the CIBC poll. It found that 39% of survey respondents believe contributing to an RRSP is “pointless” because tax will eventually have to be paid in future withdrawals.  I can see there may be a small grain of truth to this myth, but Golombek argues it is “completely inaccurate,” for two big reasons.

First, you get an up-front tax deduction the year you contribute. Second, the investments held in that RRSP contribution can get a multi-decade deferral of tax on all investment income, whether of interest, dividends, or realized capital gains.

“If your tax rate is the same in the year of contribution that it is in the year of withdrawal, an RRSP effectively provides a completely tax-free rate of return on your net contribution,” Golombek says. Furthermore, if your tax rate is lower in the year of withdrawal, “you’ll get an even better after-tax rate of return on your investment.”

And it’s often the case that even if your tax rate IS higher in the year of withdrawal, that long-term tax deferment on compounding investments is going to be superior than investing in non-registered portfolios.

This myth has been out there for a while now.

In 2016, certified financial planner Robb Engen wrote on his Boomer & Echo blog that the statement “I don’t invest in my RRSP anymore because I’ll have to pay tax on the withdrawals” started to become a lot more common after the 2009 introduction of the TFSA.

Engen does concede that contributing to your RRSP “makes more sense during your high-income working years, rather than when you’re just starting out in an entry-level position.” While TFSAs and RRSPs are to some extent mirror images, “an important caveat is that you have to invest the tax refund for RRSPs to work out as designed,” Engen wrote (or, I’d add, use the refund to reduce high-interest debt).

Those scared off by higher taxes in retirement sometimes harbour the belief that Ottawa will eventually start hiking taxes by the time you need to start withdrawing money from an RRSP.

But when he went back to check the historical record, Engen found the opposite: “Tax rates have decreased significantly for the middle class over the last two decades … Someone who made $40,000 in 1998 would have paid $6,639 in federal taxes, or 16.6 per cent. After adjusting the income for inflation, someone who’s making $56,325 in 2016 will pay $7,335 in federal taxes, or just 13 per cent.”

Related to this is the minimum annual RRIF withdrawal rules.

Here again, the trend has been to a reduction, rather than an increase, in the percentage of RRIF money that has to be forcibly withdrawn and taxed.

In 2015, the federal government reduced the minimum effective at age 71 from 7.38% to 5.28% And so on at higher ages: at age 75, the minimum was cut from 7.85% to 5.82%; at age 80, from 8.75% to 6.82%, etc. Also note that RRIF withdrawals can be even lower if you have a younger spouse.

One related concern is the dreaded OAS clawback, which starts to kick in at $73,756 of annual income as of June 2018.

If you’re in that situation, you can consider acting on Engen’s suggestion of making small withdrawals from your RRSP between ages 60 and 70, while delaying taking CPP and possibly OAS until age 70. Not only does this boost your CPP benefits by 42% and OAS by 36%, it also reduces the size of your RRSP for when you are forced to convert it into an RRIF and make mandatory withdrawals.

In short, Engen concluded: “RRSPs aren’t a scam; they’re still a critical tool for Canadians to save for retirement. They’ve just got a bad rap over the last few years because of some misguided thinking around withdrawals, taxes, plus the introduction of a new and seemingly better (tax-free) savings vehicle. RRSP contributions are still a key component of my financial plan. I’ve caught up on all of my unused contribution room and so now my goal each year is to max out my contribution limit (which is reduced by my pension contributions). TFSAs are great, and they get filled up next … Both accounts are valuable parts of our financial plan and, along with my pension, will make up the bulk of our income in retirement.”

Clearly, this one is a relatively new myth.

The RRSP had the field to itself for half a century, but the TFSA’s recent popularity seems to have come at the RRSP’s expense, even though – as Engen says above – it doesn’t have to be an either/or decision.

CIBC found 57% of those polled believe it’s better to invest in a TFSA than an RRSP, and a whopping 67% believe TFSAs are better tax-saving vehicles because they are “completely tax free.”

Engen predicts that as more baby boomers enter retirement and start to draw down their RRSPs, this belief that RRSPs are tax traps will only continue to grow. RRSPs and TFSAs are simply the mirror image of each other, he observes.

In the case of the TFSA, “you contribute with after-tax dollars and pay no tax upon withdrawal, while the other (RRSP) you contribute with before-tax dollars but you must pay taxes upon withdrawal. If you happen to be in the same tax bracket in retirement as you were when you made the contribution, the RRSP and TFSA race is a dead heat.”

(Or as another expert put it: If you put $5,500 into a TFSA, that’s it, but if you put $5,500 into an RRSP, you get a TFSA up to $2,750 for free!)

Jamie Golombek argues an RRSP is a better choice than a TFSA if you expect to be in a lower tax rate in retirement: “This is particularly likely if you are a baby boomer in your peak earning years and expect lower income when you are no longer working.”

True enough, there are a few special situations where a TFSA may be a better choice than an RRSP.

One is if you expect to be paying a higher tax rate when it comes time to withdraw money from the RRSP or RRIF. The TFSA may also get the nod if you expect to be in the situation of paying clawbacks of OAS or GIS benefits. But even then, keep in mind that if you’re in the top tax bracket, RRSPs give you almost five times more contribution room than TFSAs every year ($5,500 versus $26,010 for an RRSP in 2017.)

Matthew Ardrey, wealth advisor and vice president of Toronto-based TriDelta Financial, said he had just been discussing this very topic with a 31-year old professional, who seems to have the typical millennial take on RRSPs. “His feeling is that the RRSP is not a good idea because of the taxes you pay on the way out. It is only useful for the rich/high income earners and should only be used after the TFSA has been maximized. He is not alone in his feeling. I have found this with many clients across the spectrum.”

My own take is that for most earners in the top tax brackets, and especially two-income households, they don’t have to choose between the RRSP and the TFSA; they should do both. But if you DO have to choose, Ardrey says the decision as to which is better is strictly a math equation.

For this report, Ardrey created the example below comparing RRSPs to TFSAs, using three sets of tax rates: those that are the same now and in retirement, higher in retirement and lower in retirement. He concludes there is no tax on growth in either an RRSP or a TFSA. (Note that the example does not include non-registered accounts.)

Same tax rate

Income before taxes to save $10,000 $10,000
Tax at 50% $0 -$5,000
After-tax available to contribute $10,000 $5,000
Future Value (FV) with 5% return for 25 years $33,864 $16,932
Tax at 50% -$16,932 $0
After-tax withdrawal in retirement $16,932 $16,932

Lower tax rate in retirement

Income before taxes to save $10,000 $10,000
Tax at 50% $0 -$5,000
After-tax available to contribute $10,000 $5,000
FV with 5% return for 25 years $33,864 $16,932
Tax at 25% -$8,466 $0
After-tax withdrawal in retirement $25,398 $16,932

Higher tax rate in retirement

Income before taxes to save $10,000 $10,000
Tax at 25% $0 -$2,500
After-tax available to contribute $10,000 $7,500
FV with 5% return for 25 years $33,864 $25,398
Tax at 50% -$16,932 $0
After-tax withdrawal in retirement $16,932 $25,398

This example may be simple, but it nicely illustrates what Golombek is saying. As Ardrey says, “The RRSP is being seen as a negative and this could have significant impact on future retirement planning.”

For this report, Ardrey created the example below comparing RRSPs to TFSAs, using three sets of tax rates: those that are the same now and in retirement, higher in retirement and lower in retirement. He concludes there is no tax on growth in either an RRSP or a TFSA. (Note that the example does not include non-registered accounts.)

Here again, there is a germ of truth to this myth. In Canada particularly, many people have the idea that debt is bad and should be avoided at all costs. Indeed, I and others tend to believe that being free of all debt, including mortgage, is a cornerstone of financial independence.

There’s certainly nothing wrong with paying down debt, and a December 2017 CIBC poll showed that debt repayment has been a top priority for Canadians for eight straight years.

Golombek agrees that paying off high-interest debt should take priority over retirement savings. After all, a typical credit card charges a tad under 20% a year in interest on outstanding balances, and it’s well-nigh impossible to earn an after-tax guaranteed annual rate of return of 20% in an RRSP or anywhere else. So chalk one up for paying non-deductible high-interest consumer debt.

However, it doesn’t follow that you should also pay down low-interest mortgage debt at the expense of RRSP or other retirement savings. Such a decision is often an emotional one that isn’t driven by the numbers, Golombek says, especially with mortgage interest rates still hovering near 60-year lows.

Matthew Ardrey believes there is a point at which it makes more sense to save in an RRSP than pay off debt: “It all comes down to opportunity cost. If you can earn better returns in your retirement savings than what your mortgage is costing you, then it makes more sense to allocate your funds there. This is especially true with interest rates at current low levels. To focus only on debt may leave someone in the situation of being house rich and cash poor.

”The same question can arise with TFSAs. But Ardrey points out that investors may be able to get the best of both worlds by making an RRSP contribution, then using the tax refund either to pay down debt and/or contribute to a TFSA.

In the CIBC poll, “Not having enough money” was the single biggest excuse for non-savers aged 35 to 54.  But that’s exactly what it is: an excuse, not a valid reason.

The principle of not missing what you never actually see in your hands has long applied to the taxation of income “at source” by Government. The same idea can be used with saving: If you set up a PAC (Pre-authorized Chequing) arrangement with your financial institution, regular modest amounts can be deducted right off your paycheque every few weeks so that, like tax, you never are even tempted to spend it.

Yes, you are forced to live on a bit less of disposable income, but that’s always going to be the case with saving. It’s all about living below your means in the present, and saving and investing the difference for future consumption.

And the very fact of setting up an RRSP PAC can be made palatable by also asking your employer to deduct less tax at source, corresponding to the ultimate tax refund you might have received if you waited till the end of the year, when you file your annual taxes.Mathew Ardrey endorses the idea of an RRSP PAC arrangement for enforced saving. “One of the best ways to add this to a budget is through a forced savings program a little bit at a time. It is daunting to make the contribution all at once, but weekly or monthly contributions are much more palatable. Just like you wouldn’t eat a meal in one bite, save for your retirement one contribution at a time.

”Warren Baldwin, a long-career fee-only advisor who recently retired from T. E. Wealth, says those who feel they “can’t afford” to contribute should consider using a bank loan to get started in their first year of saving for retirement. “Even a small one will give you a taste of the process and the tax savings or refund can help repay the loan early. Then continue the loan payments and make these as RRSP contributions after that. Starting is the most important thing, and after that the RRSP growth and further contributions can become their own form of reward.”

CIBC found half (49%) of the people they polled don’t expect to use RRSPs as their main source of income in retirement. In fact, 40% of them – including a third of those 55 or older – do not currently have an RRSP.

This one baffles me, because apart from a TFSA, I can’t imagine what these supposedly superior alternatives to RRSPs might be. About one in five (18%) listed non-registered savings, but there’s no way non-registered savings are more tax-efficient than an RRSP.

In fact, retired actuary Malcolm Hamilton used to tell me that saving outside tax shelters in Canada was largely a “futile” exercise, one that dooms investors to breaking even at best after taxes and inflation. Remember, when you have non-registered investments, you have to pay tax each and every year on every $1 of interest and dividend income, and often realized net capital gains as well.How about home equity? This was mentioned by 19% of those in the CIBC poll, but I consider a principal residence to be a necessary item of consumption, not an investment. Yes, if you do sell one day, it probably is a tax-free capital gain, but it’s hardly a diversified investment like the financial assets that can be sheltered in an RRSP.

Investment real estate, perhaps? This was mentioned by 15% of CIBC respondents, and there’s little doubt that investment real estate is a valid route to building long-term wealth if you don’t mind the lack of diversification and the hassle of being a landlord. Personally, I’d prefer to hold a more diversified REIT (Real Estate Investment Trust).

About the only valid alternative to an RRSP that I can think of would be a workplace Defined Benefit pension, but even here, there’s a direct relationship between an employer-provided pension and RRSPs. The better your pension, as defined by how big your Pension Adjustment (PA) is on your T-4 slip, the less you can save in an RRSP anyway. And vice versa: Those without large employer pensions have little or no Pension Adjustment, and therefore lots of RRSP contribution room. And if you wish to retire in style, you had better maximize those contributions!

The last alternative I can think of is annuities. At the end of your 71st year, you either have to cash out and pay tax at one wallop, convert an RRSP at that age to a RRIF, or buy an annuity with it. An annuity is in effect a personal pension plan – but remember that if you want to buy a registered annuity, you need to have funded an RRSP in the first place in order to get the money to buy the annuity. (The other alternative is prescribed annuities, which are tax-advantaged annuities funded with non-registered investments).

So while there are indeed alternatives to RRSPs, for my money you can’t beat the ease, diversification and tax-deferred advantages of the RRSP.

If you want a TFSA, have a TFSA as well as an RRSP. By all means, own your own home free and clear, but that should be done in addition to an RRSP. Take your employer up on any offer of a pension plan, but again, this should be above and beyond your RRSP. And if you value annuities, then start by building up your RRSP until you reach the age when it makes sense to annuitize. 

Sadly, there is also some truth to the belief there are huge tax bills when you die, or to be precise, when the second spouse dies. Remember, however, that after the first spouse dies, the RRSP or RRIF rolls over untaxed to the hands of the survivor.

If that survivor lives to a ripe old age, those annual rising minimum RRIF withdrawals will gradually melt down your RRIF, so there may not be all that much left for the taxman at the end. The annual withdrawal percentage rises to 20% by your 90s, so if you do reach 100, the taxable status of your RRIF post your death will be the least of your problems. By that age, you may have significant health care issues, and you’ll probably wish your RRIF income were higher!

Jamie Golombek says that tax rules require the market value of your RRSP or RRIF as of the date of death to be included in income on your terminal tax return: Tax is payable at your marginal rate for the year of death.  But apart from a tax-deferred rollover to beneficiaries like a designated surviving spouse or partner, he adds that in some cases, that beneficiary can also be a financially dependent child or grandchild.

Another way to minimize income taxes on RRSP/RRIFs at death is the aforementioned early drawdown of registered assets. You can take annual withdrawals from those plans during your lifetime in order to maximize the income that will be taxed at low rates by forcing additional withdrawals in the years you’re occupying a lower tax bracket.

These first six RRSP myths, we credit to Golombek. Credit Warren Baldwin for myths No. 7 to 10.

“Yeah, right,” says Baldwin about the notion you can wait till you’re older before starting an RRSP. “And nothing else like a new family or house purchase could possibly arise to delay this? Now is the perfect time to get on with building financial protection for later in life. Don’t doubt the power of long-term compounding of returns.

”Several surveys have asked investors what they might have changed if they had a chance to go back and do things over again.Usually topping the list is the wish they had started saving far earlier than they actually did: preferably as soon as they landed their first job after graduation.

There’s no better way to maximize the time value of money, and with time on your side, you can afford to be more aggressive by investing in growth stocks.

The combination of more time in the market and more growth investments can do wonders for your future nest egg, especially when you add the long-term tax deferral an RRSP or TFSA provides.Six or seven decades of such growth, and you’ll certainly have no regrets. 

The myth that you’re “not qualified” to manage your RRSP is another lame excuse that can easily be exploded.

“Better to learn now with small assets than wait until there is large money to invest and fail to get it right then,” Baldwin says. He points out that an investment mistake on a $2,000 RRSP account is less critical than a loss that might happen if you mismanage something much larger, such as a $200,000 inheritance. “Besides, there are many good guides to investing; watch the costs and set up a long-term straightforward portfolio, have an asset mix plan and stick to it – all this even if you only have $2,000.

”The “no knowledge” excuse is especially lame when you consider that there are excellent reasonably priced balanced mutual funds (from companies like Mawer or Steadyhand) that are essentially “one-decision” investment solutions that take care of everything from asset allocation to geographical weightings and rebalancing.

That’s in effect what robo-advisers do, typically at a reasonable annual cost of 0.5% of a portfolio, plus the fees of the underlying ETFs.If that’s too rich, consider Vanguard Canada’s new suite of three asset allocation ETFs, which invest in seven of Vanguard’s domestic and international equity and fixed-income ETFs all for little more than 0.22% a year.

Younger people learning the ropes could go with the Balanced version (VBAL/TSX, which is 60% in equities and 40% in fixed income) and if they get comfortable with the risk, move up to VGRO, which has an 80% to 20% mix of stocks to bonds. Those in retirement or who are very conservative could go with the Vanguard Conservative portfolio, (VCNS/TSX), which is 80% in fixed income and just 20% in domestic, US, and global equities.

The beauty of these “one-ticket” solutions is that you can sit back and let Vanguard do practically everything on your behalf: the mix of stocks and bonds, the sector and geographic allocation, choosing the actual securities and “rebalancing” regularly to make sure any one asset class (typically stocks) don’t get out of proportion to your original investment objectives.

It doesn’t get much better than that, especially for those who think they don’t know enough to manage the money in their retirement nest egg. 

Like the other lame excuses, the myth that the tax refund generated by an RRSP contribution will take too long to arrive is easily rebutted. Baldwin suggests using a group RRSP provided by your employer so that contributions are effectively made pre-tax. The tax refund is effectively made as the contribution occurs, which means you have to forgo less “net” income for a given amount of RRSP contribution.

For example, if you planned to contribute $2,000 for the year, you could contribute $167/month to a non-group RRSP. Assuming you’re in a 30% tax bracket, you would normally file for a $600 tax refund when it comes time to file your taxes.

However, by making the same $2,000 contribution through a group RRSP directly off the employer’s payroll, the NET reduction in take-home pay would only be $117 per month ($167 minus the at-source 30% tax savings).

Not only are your regular RRSP contributions made in manageable bite-size chunks, but you’re getting your tax refund every time you’re paid and make a contribution. So you can safely jettison excuse number 9 for not contributing!

“Nope,” says Baldwin, “All the same investments and GICs can be moved to a RRIF. The only thing different in a RRIF is that you have to make sure that enough cash is available in the RRIF in order to make the required payment(s) each year.

”Going back to Myth 8, those who went with a simple “one-decision” balanced fund or conservative asset allocation ETF invested at least 40% in fixed income would easily be generating enough cash each year for the forced annual RRIF withdrawals.

This myth was contributed by an investment adviser whose employer won’t permit him to be named.

He says RRSPs are as flexible as their built-in investments; an RRSP can be bought on a Tuesday and collapsed on a Wednesday if need be. It can be acquired this year and withdrawn the next if your tax bracket drops, or if you really need the money regardless of tax liability.

You also need to distinguish between the concept of RRSPs in general and the RRSP you actually own. Some people object to certain types of RRSPs that are “underperforming,” perhaps because they hold high-fee mutual funds but that doesn’t mean all RRSPs are therefore bad. It’s like parking a poor vehicle in a nice garage.

“There is nothing in Canada more valuable than a custom-built RRSP designed with your income tax, your age, your spouse, your career, your debt and your personality all taken into consideration,” concludes this expert.

TriDelta’s Matthew Ardrey believes failure to obtain good professional advice contributes to the propagation of most of these RRSP myths. “Appropriate professional advice can explain away these myths and allow people to get to financial independence.” 3 Bonus Myths CFP Robb Engen blogged on Golombek’s RRSP myths on his Boomer & Echo blog in early February: “Frustrating Financial Beliefs.”  He likens the one about RRSPs being a tax trap in Ottawa’s favor to three other related retirement myths that are less focused on RRSPs:

So we have more than a dozen flawed excuses for not putting money aside for retirement. If the experts here are largely in agreement about the value of the RRSP, then what are you waiting for? The RRSP contribution deadline for the 2017 tax year is Thursday, March 1, 2018.

The clock is ticking!

Jonathan Chevreau is founder of the Financial Independence Hub, author of Findependence Day and coauthor of Victory Lap Retirement. He can be reached at [email protected].

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