Why RRSPs Are an Excellent Account

Dave and Julia unpack why RRSPs have taken so much unfair heat and why that misinformation is costing people.

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I think RRSPs are taking way too much heat. In fact the number of people out there spreading misinformation about RRSPs in the last five years has been one of my biggest annoyances in all the years I’ve been out there. And now you’ve got a lot of people in their thirties saying, I’m not getting involved in the RRSP because my dad told me it’s way too heavily taxed and I take it out, et cetera.

And they’re in the exact situation where it would be better if they could only go RRSP or TFSA to go RRSP. How did all this happen? And do you agree?

I think RRSPs are the easiest, magical, tax efficient account that we have. People are always coming to me looking for the next best fancy tax strategy, and I’m like, yeah. So RRSPs, they’re like, oh, but I thought we, I’m like, that’s the first place we go. It’s so easy, it’s so magic. It’s an excellent tool.

Where I think people get disconnected with it, is that there’s all these different rules and they don’t understand it, and they’re using it in ways that aren’t how it’s intended to be used. So I often say to people is your RRSP is a pension. Imagine if your employer provided you with a pension, which is not available for lots of people.

They’re like, oh gosh, a pension would be great. I’m like, yeah, wouldn’t that, you know what the new thing is about a pension is when you contribute to it, you get a tax deduction. They’re like, oh yeah, that’s fantastic. And then it grows. No taxes until you start taking the money out. They’re like, yeah, that’s great.

And then when you take the money out, it’s taxed. Amazing. That makes sense. I’m like, okay. It’s the same thing.

Yeah, exactly. And usually at a lower rate. There, there’s a misconception out there that you’re gonna bring it out into a higher tax bracket. Certainly can happen theoretically,

But like, good for you. Honestly, exactly. So everything you’re saying about the RRSPs, I totally agree with.

And again, I think that yeah they are. And again, are they perfect? No, you could bring it out and get hit with the OAS claw back, which has to be add to your effective tax rate. But for most people, most of the time, they’re an outstanding vehicle. And all of this negative information’s hurting a lot of people because they’re buying into it.