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Turn Your RRSP or IPP into a solid Retirement Plan


Hold private mortgages in your RSP to generate annual returns in the range of 8% to 20%.

Use your RSP to provide 1st and 2nd mortgage loans

Use your RSP to purchase a rental property

Use your RSP to purchase a new home for yourself


What is an RRSP?  

An RRSP is a registered retirement savings plan that allows you to make tax deductible contributions up to age 71; providing tax sheltered income, growth, and capital gains

But attracts the highest marginal tax rates when you retire, start withdrawing for an income, or die without a spouse or partner to roll your plan into theirs

In the year you turn 71 you must convert your RRSP - RSP to a RRIF-RIF (Registered Retirement Income Fund) then withdraw the mandatory minimum of  5.28%. Or you are taxed by CRA even if you dont take this money out of your RIF.  Withdrawals from your RIF are taxed at your highest marginal income tax rate

Depending on your circumstances marginal tax rates as high as 50% may be applied by Canada Revenue Agency (CRA) when you die! Learn how to stop CRA from becoming a beneficiary of your estate

RRSP's are not for everyone, and for lower income earners (below $45,000 YR)  may not be appropriate in light of the TFSA contribution room now available.  RRSP's may be appropriate for you depending on your needs, resources and stage of life

In light of the recent changes in the taxation of small businesses its better to take a salary to reduce corporate tax and increase your RSP contribution room and CPP contributions

For younger folks just starting out its best to maximize your TFSA savings and investments. Wait until your earnings move into a higher tax bracket to start an RRSP so your tax savings are much higher. Use your tax refund to add to your TFSA investments each year. 

For older or retired folks with high 6 figure or 7 figure RRSP accounts get ready for a big tax problem. If you want to to pass your RRSP savings to your children you should consider buying a life insurance policy to cover your future tax liability.

Group RRSP contributions are made pretax by your employer so you wont get a tax refund. And is viewed by CRA as a taxable benefit. That will be offset by your RRSP contribution room. The next tax year this contribution is subtracted from from your contribution room through a PA Pension Adjustment $ amount.

Personal RRSP contributions are made with after tax dollars so you will get a tax refund as long as you have sufficient contribution room


RRSP Strategies to Minimize Tax


  1. If you earn below $45,000 taxable income an RRSP is not a great long term strategy as it generates a refund of 22%. 
  2. If you're a first time home buyer max out RRSP contributions to save your $25,000 for your HBP withdrawal. 
  3. If you earn higher taxable income of $130,000 an RSP might just be a great idea as each dollar contributed generates a refund of 47 percent
  4. Withdraw (deregister) your money from your RSP in low tax years or low income years before retirement.
  5. Deploy an RRSP meltdown strategy of using leveraged investment loan interest to offset taxable income triggered by an early RSP withdrawal
  6. Use the RRSP meltdown strategy to convert your RSP to a Non Registered Investment Account if you have significant fixed pension income
  7. Hold US stocks in your RRSP to avoid the 15% with holding tax
  8. Save and invest your tax refund in your TFSA
  9. Save and invest you tax refund in your RSP
  10. Convert RRSP to RIF early then delay taking CPP to generate a return of  of .7% per month or 8.4% for each year you delay applying. Provides 42% higher CPP payments by age 70
  11. Early RIF withdrawals can potentially reduce OAS claw backs later on
  12. If a couple each has an RRSP they could RIF one early then income split
  13. Max out RRSP contributions,  just pay the tax when you retire, but take out permanent life insurance to pay your future tax bill 
  14. Borrow to make an RRSP contribution if you're in the highest tax bracket
  15. Make your contributions at the beginning of the year to give your money longer to grow
  16. If your marginal tax rate is lower in retirement that it was when you were working then the RSP tax strategy is working



The following Investments can be held in an RRSP, RRIF, RIF:


RRSP investments can include the following: Cash, GICs, Savings Bonds, Treasury Bills,government bonds, corporate bonds and strip bonds, Gold and silver bars, RRSP eligible Mutual Funds, Segregated Funds, Guaranteed Minimum Withdrawal Benefit, ETFs, Canadian and foreign stocks, some derivatives and options, Canadian mortgages, Mortgage backed securities, and Real Estate Investment Trusts. Best investments are those that generate 8% to 12% annual returns.

Some personal finance industry bloggers and investment companies have biases and conflicts of interest that are not properly disclosed to the prospective investor. Agile Financial Services believes that all biases and potential conflicts of interest should be properly disclosed in writing before any investment decisions are made. 

Which is Better an RRSP or TFSA? 

  1. Many internet personal finance writers claim that RRSP contributions are made in after tax dollars. In fact most personal RRSP contributions are made after your income tax was deducted. Your refund tax rates are usually in the range of 22% to 47% per dollar. Contributions to both RRSP's and TFSA`s are made with after tax dollars. Except for employer Group RSP contributions which are made pretax and not classed as a taxable benefit as long as you have adequate contribution room.
  2. Both RRSP`s and TFSA`s provide tax sheltered income, growth and capital gains
  3. Capital gains and losses are not tax deductible in either RRSP`s or TFSA`s
  4. Account fees are not tax deductible in either RRSP`s or TFSA`S
  5. Interest on borrowing to invest in either RRSP`s or TFSA is not tax deductible
  6. RRSP’s are for retirement income. TFSA’s are to save and invest for any financial goal but work best for long term investments and retirement income planning
  7. Personal RRSP contributions are tax deductible on your annual tax returns. TFSA contributions are not tax deductible.
  8. RRSP withdrawals are taxed at your highest marginal tax rate. TFSA withdrawals generate no income tax and are TAX FREE.
  9.  After you turn 71 you can’t make contributions to your RRSP; you must convert it to a RRIF.  There are no age limits with a TFSA. 
  10. You need earned income to deduct an RRSP contribution.  You need after tax dollars to contribute to your TFSA.
  11. When you're retired withdrawals from your TFSA dont reduce government benefits. RRIF withdrawals usually reduce government benefits


RRSP Tax Considerations

RRSP withdrawals attract a Withholding Tax

Taking money out of your RRSP account prior to retirement requires you to report it on your income tax when you file. The financial institution that administers your RRSP also withholds a certain percentage of the money you withdraw, depending on the amount. The CRA RRSP withholding tax works as follows:

RRSP Withdrawal Tax Rate

  • Withdrawals up to $5,000 — 10 percent tax is withheld
  • Withdrawals of  $5001 to $15,000 — 20 percent tax is withheld
  • Withdrawals of $15,000 and up — 30 percent tax is withheld

If you make a pre-retirement RRSP withdrawal, you also may have to pay additional income tax at the end of the year. This depends on your tax bracket and if the withdrawal puts you into a higher tax bracket you may have to pay more income tax

Tax Tips for getting more from RRSP`s

Employer group RRSP contributions are made in pre tax dollars

Personal RRSP contributions are made in after tax dollars

You can contribute to you RRSP any time as long as you have the contribution room and cash to do so.

You can make a contribution not deduct it then carry it forward to another tax year You don’t have to take the deduction in the year you made the contribution. You can defer taking the deduction to the following year if you know you’re going to be in a higher tax bracket the following year.

One of the many benefits is the option to carry forward your unused contribution room, and carry forward unused deductions to a higher tax year.  You can also defer contributions to a higher tax year.

When you don’t make use of your contributions you can still make a contribution to a spousal rrsp. However you can’t make contribution’s after you turn age 71

If you pass away before age 71 and your spouse survives you , is under age 71, you have unused contribution room and no deductions were made for prior contributions. Your executor can make contributions and deduct them in the year of your death on your terminal tax return. The spousal contribution should be made in the year of your death or within the 60 day rule (the first 60 days of the next year anytime during Jan or Feb that following year.


Your Spouse or Partner 

You should always consider tax liabilities when setting up your RRSP and TFSA, and your will.  When you pass away CRA considers there is a deemed disposition even if your investments were sold or not so they can they apply incomes taxes. Most assets can be passed tax free to your spouse or common law partner

RRSP’s, RRIFs have high tax liabilities because all of their holdings are taxed when their owners pass away. When an RRSP annuitant dies (the owner), it’s often possible to roll over the RRSP to a qualified beneficiary on a tax-deferred basis. If the beneficiary is a spouse, common-law partner or a financially dependent child or grandchild with a mental or physical disability, the beneficiary can can contribute the proceeds directly to their own plan, rolling over tax free to the beneficiary’s RRSP or RRIF (among other pension, annuity or RDSP options).


What Happens to my RRSP or RRIF when I die?

The total value of  RRSP/RRIF investments or cash are taxable to the deceased in the year of their death. Income or capital gains generated from the date of death to the date of you receive the proceeds are taxable when you get your loot. 

Your executor (or spouse) can rollover your RRSP/.RRIF  to your spouse’s RRSP,  common law partner's or dependents RRSP or RRIF

When your spouse or common-law beneficiary (defined as a qualified beneficiary) includes your cash or investments from your RRSP or RRIF amount in their income tax return CRA classifies this as a “refund of premiums”. Your beneficiary defers (which effectively eliminates) the taxation on this amount by making a contribution to their RRSP or RRIF.

Transfer of assets in kind or in cash directly to the spouses RRSP of RRIF reported as income on their annual tax return then claims a tax deduction for the amount deposited in the RRSP or RRIF account.

Cash or investments are paid to the spouse then contributed to their RRSP or RRIF within 60 days after the end of the year that the spouse beneficiary received the RRSP proceeds. 


Converting RRSP`s to RRIFS (RIF`s)

Contributions can be made up to the end of the year you turn 71. At the end of the year you reach age 71 you must convert your RRSP to a RRIF (REGISTERED RETIREMENT INCOME FUND). Your RRIF will pass to your spouse tax free when you pass away. When your spouse passes away the $ value of your RIF is added to your income that year then taxed at the appropriate marginal tax rate. RRSP’s are a great self-directed saving for retirement vehicle. BUT you're kicking your income tax day of reckoning down the road. If you’re saving and investment activities are successful you or your spouse will pay significant income tax at some point.


Locked in RRSP’s OR LIRA’s Locked In Retirement Accounts

Is an RRSP with funds that have been transferred from a pension plan are locked in and withdrawals are restricted to hardship applications until retirement. Provincial legislation requires that these funds be locked-in. At the time of retirement, funds in a locked-in RRSP are converted to a life income fund. 

Spousal RRSP Advantages

If your spouse is not working or has a lower income than you consider contributing a spousal RRSP

A Spousal RRSP allows you to contribute to your Spouse’s RRSP? One spouse makes contributions to the other spouse’s RRSP. Be aware that when you do this your spouse now becomes the legal owner of the account and investments. And you no longer have a claim and this money. Spousal RRSP’s are a great way to reduce income tax while you are working. Then redirect income to the lower income tax spouse during retirement. 

Your spouse has to wait for 3 years after your contribution to withdraw the same dollar amount that you contributed. Take the following example; If your spouse withdraws from their RRSP during 2016.  If you contributed to any spousal or common-law partners RRSP in 2014, 2015,or 2016 you probably have to report this as income all or part of these amounts your spouse withdrew.

The spousal RRSP has five main benefits:

  1. Each spouse can have a retirement income that allows both to take advantage of the personal credit, and the age credit and pension tax credit at age 65.
  2. Both spouses can split RRSP retirement income across 2 taxpayers instead of one
  3. Allows you to split incomes prior to age 65
  4. Both spouses can make withdrawals under the Home Buyers Plan and the Lifelong Learning Plan
  5. If you're over age 71 and have available contribution room you can make tax deductible contributions to a your spouse’s Spousal RRSP, as long as your spouse is still under the age of 71


Annual RRSP Contribution Limits-Maximum Contribution amounts

You can contribute to the RRSP deduction limit of 18% of the previous years earned income, up to a maximum annual dollar limit. The 2017 RRSP contribution limit is $26,010.  The current RRSP contribution maximums are:

2005 RRSP Contribution Limit $16,500

2006 RRSP Contribution Limit  $18,000

2007 RRSP Contribution Limit $19,000

2008 RRSP Contribution Limit $20,000

2009 RRSP Contribution Limit $21,000

2010 RRSP Contribution Limit $22,000

2011 RRSP Contribution Limit $22,450

2012 RRSP Contribution Limit $22,970

2013 RRSP Contribution Limit $23,820

2014 RRSP Contribution Limit $24,270

2015 RRSP Contribution Limit $24,930

2016 RRSP Contribution Limit $25,370

2017 RRSP Contribution Limit $26,010

2018 RRSP Contribution Limit $26,230


Borrowing to Contribute to a RRSP


Its not a good idea to borrow money to contribute to an RRSP unless:

  1. You’re in the tax bracket where you get a 35% to 45% tax refund

  2. You can afford to pay off the loan within 12 to 24 months

  3. You can afford to make an RRSP contribution from your annual cash flow.

Using the following example we can understand if its worth it to borrow to make an RRSP contribution. Or is it worth it all to make an RRSP contribution


Taxable Income $ 75,000

Ontario tax $15,735

After Tax Income $59,265

Average Tax Rate  20.98%

Marginal Tax Rate 31.48%

Marginal Tax Rate on Capital Gains 15.74%

Marginal Tax Rate on Eligible Dividends 8.29%

RRSP Contribution $13500 Note RSP contributions are after tax income

Cost of Borrowing 4.75% for 12 months = $13,500 x 4.75% = $351 with monthly payments of $1,154.31

Tax Refund Ontario $4,037

If you apply your tax refund to pay off the RRSP loan then the loan only costed you $9,463

Interest on the RSP loan is not tax deductible





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