# RRSP advice.



## Banalanal (Mar 28, 2011)

I have had no income in the past few years. I have cash and stock holdings in taxable accounts. I hold no rrsps. In the coming years I expect to receive capital gains and dividends that will put me in a tax paying bracket. I plan to continue to invest all of the capital gains and dividends. Does it make sense for me to invest those cap gains and divs in an rrsp to bring down my taxable income? Will there be any forced withdrawals in the future or rrif to consider? 

Thanks.


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## Xoron (Jun 22, 2010)

Why not move some over to a TFSA account? Tax free growth, might even get you down to the level where you're not paying taxes again in your taxable account.


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## Banalanal (Mar 28, 2011)

My next purchase will be in the tfsa. But as far as rrsp goes, do they make sense given I will likely start having yearly capital gains and dividends which I plan to fully invest?


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## Xoron (Jun 22, 2010)

RRSP makes the most sense when you can get a nice tax refund due to RRSP contribution. For lower income people (and if you're just sneaking into a payable tax bracket, this includes you), then TFSA is a better option.

http://www.moneysense.ca/save/save-for-retirement-in-an-rrsp-or-tfsa

*"Despite the flexibility in TFSAs, RRSPs are still the best long-term retirement savings vehicle for many Canadians earning an income of $50,000 or more, especially as they reach their peak earning years in their 40s and 50s."*


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## CanadianCapitalist (Mar 31, 2009)

Probably not. If you are in a low tax bracket, you may be better off avoiding RRSPs altogether. There is not enough details in your post to comment.


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## Banalanal (Mar 28, 2011)

I expect net income from investments (my only source of income) going forward to range from 15'000$ to 150'000$ in any given year. The amounts will be erratic based on whether the amount is from dividends or capital gains and there is no way to know currently. I will easily max out the TFSA next stock I buy and still be buying more in a taxable account.

I am curious if it makes sense to use an RRSP going forward.

Thanks so far for the replies.


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## Eclectic12 (Oct 20, 2010)

According to the Moneysense quote - the years your income is over $50K, it will make sense to contribute to the RRSP. 

Though if investments are your sole source of income, I'm not sure how much RRSP room you will be earning as I thought I read somewhere that capital gains were not included in the RRSP contribution room earned calculation.

If your income is fluctuating that much, there shouldn't be too much of a worry about withdrawals as you can use the $15K income years to withdraw from the RRSP and contribute to the TFSA. The withdrawal from the RRSP will destroy contribution room so you will have to carefully consider if the withdrawal amounts in the future are really that bad of a problem for you and how you would earn new RRSP contribution room.

Then too - what do you think your retirement income will be like? Will there be anything in addition to your investments? Will there be CPP?

That's going to affect how large an RRSP (and if you want one).

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/cntrbtng/menu-eng.html
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnng69/yrwn-eng.html
http://www.moneysense.ca/retire/how-to-tap-your-rrsp


Cheers


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## Banalanal (Mar 28, 2011)

Thanks for the replies. 

So I'm going to need to find out if my sole incom e from cap gains and divs are allowed to be deposited into an rrsp with the intention of bringing down my taxable income.

I see that on my last year's assessment, I can contribute 29'000$ this year. It should make sense to only use that room if I am over X dollars bringing me into a taxable income. I need to find out what that X is. And save the contribution room for another year with a higher investment income if below X. And if I max out the 29'000$ what will the next year's max allowable contribution be? Is it 22'000$ or 5'000$? How does that work?


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## Spudd (Oct 11, 2011)

If you max out the 29,000 then your room the next year will be zero, because you didn't have any employment income. Employment income is what creates RRSP room.


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## Banalanal (Mar 28, 2011)

Ah, so that answers my question. If investment income is not considered rrsp deduction eligible then I won't have rrsps going forward.


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## Spudd (Oct 11, 2011)

But if you have the room now, you can still use the deduction, I'm pretty sure - you just won't get any additional room going forward.


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## Taraz (Nov 24, 2013)

There's no reason to use an RRSP if you don't have employment income - in fact it would probably increase your total tax load.

1) I'm pretty sure that RRSP contributions only offset employment income (not dividend or capital gains income). So if you had no employment income, you would not gain any tax deduction by putting money into an RRSP.

2) When taking the money out of the RRSP, it's taxed at the same rates as earned income (which is higher than dividend or capital gains rates). 

Just keep it in a non-registered account and pay the tax. Alternatively, you can start a business and invest from within the business (perhaps you already have one)?

http://www.canadianbusiness.com/inv...hould-and-shouldnt-make-rrsp-contributions-2/


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## Guban (Jul 5, 2011)

^ 
1) is incorrect. RRSP deductions go against any income. RRSP room is only earned by employment (or rental) income.

2) is a valid concern, however.


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## Taraz (Nov 24, 2013)

Guban said:


> ^
> 1) is incorrect. RRSP deductions go against any income. RRSP room is only earned by employment (or rental) income.


Thanks Guban - I stand corrected.


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## Banalanal (Mar 28, 2011)

Great guys. Excellent information. Thanks.


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