# How much do you contribute to your RRSPs?



## Sampson (Apr 3, 2009)

Over at MDJ today: The State of Canadian Family Finances - 2008

I am always amazed by the low RRSP contribution rates - everybody seems to talk about it, at the lunch room, at coffee, but I suppose there are only a few people actually talking about contributions - many will just go quiet - I guess they're the ones that don't contribute.

I've been contributing since I started working at 13. I contributed a decent amount - as much as a teen could, then through Undergrad and Grad school, I continued, but earned so little income.

Then 'first' job - I caught up right away, and I've always maxed out my contributions every year, as has my wife.

18% for me


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## CanadianCapitalist (Mar 31, 2009)

18% for me for every year I've been working.


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## Rickson9 (Apr 9, 2009)

My contribution amount varies year to year depending on other factors such as corporate pension plan contributions etc. 

For example, my company automatically places $5,000 into my pension. If I contribute $5,000 they will match it with another $5,000 for a total annual pension contribution of $15,000. This amount affects my RRSP contribution room.

A more relevant question is what % of your available RRSP space do you maximize every year; for me that would be 100%; or the poll should include the option "it depends".


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## Sampson (Apr 3, 2009)

Rickson9 said:


> My contribution amount varies .... depending on ... corporate pension plan contributions ...
> A more relevant question is what % of your available RRSP space do you maximize every year.


Agreed. It ran across my head when I was thinking about it - this is my first year on a pension plan so I haven't really incorporated it into my thinking.

Maybe subsequent readers can include pension contributions so if you have 5% pension contributions and subsequently put 5% of gross income into RRSPs, we'll call that 10%.


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## stephenheath (Apr 3, 2009)

Well, I guess I'm the odd duck out  When I first started working I maxxed out my RRSPs for a couple years so that there was enough to tap the HBP, and I quickly bought my first house, which I could barely afford (only got the mortgage through cosigning). As my income grew, I increased my mortgage payments rather than pay into the RRSP, as both the equity in my house and the funds in my RRSP would grow tax free, but the equity in the house could be tapped for emergencies as time went on.

After getting married, two moves, and finishing my post grad I have gotten to the point where now I make accellerated payments on the mortgage, fill up the TFSA each year for both me and my spouse, and then hopefully have a bit extra on top to throw into the RRSP, but that's only about 0-5% for now. In a few years when the mortgage is paid off, I'll boost that up to about 25% just by taking what were mortgage payments and saving them.


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## FrugalTrader (Oct 13, 2008)

Great question. My wife contributes to a DBP, so she has very little RRSP room. I max out my employer based RRSP (matched), then contribute the rest to my self directed RRSP up to 18%.


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## ethos1 (Apr 4, 2009)

Stephen & FT, it all depends on your personal circumstances as well as the ability to even put one-dollar into an RRSP (some are not so lucky)

Some folks have the luck of the draw like FT & his spouse, others are not so lucky

As a 62 year old my suggestion to the younger posters is to get rid of that mortgage in the quickest fast time possible and forget for now the RRSP, unless you really have excess cash or the ability to do it.

I can only imagine those that contribute every year to RRSP's & TFSA's and take 25-years to pay off their mortgages

I'd prefer to pay off the mortgage in half that time then take the next 12 years maxing on missed RRSP's & TFSA's - the contribution room never goes away

_*For what its worth*_


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## Mockingbird (Apr 29, 2009)

ethos1 said:


> Stephen & FT, it all depends on your personal circumstances as well as the ability to even put one-dollar into an RRSP (some are not so lucky)
> 
> Some folks have the luck of the draw like FT & his spouse, others are not so lucky
> 
> ...


I believe it depends on the individual's situation.
There are online calculators to assist people with this process.
https://www.retirementadvisor.ca/retadv/apps/mortrrsp/mortgrrsp.jsp?toolsSubMenu=family


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## stardancer (Apr 26, 2009)

When I was working, I used to contribute the max, give or take $100. It wasn't that much/year because of the pension adjustment. When I retired, I took a year off to settle into retirement income. Now that I have a seasonal job, I put in $1000/year to offset the increased tax bill. Once I leave that job in 3-4 years, I will make a final contribution before turning it over to a RIF.


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## ethos1 (Apr 4, 2009)

Mockingbird said:


> I believe it depends on the individual's situation.
> There are online calculators to assist people with this process.
> https://www.retirementadvisor.ca/retadv/apps/mortrrsp/mortgrrsp.jsp?toolsSubMenu=family


indeed & I did

the numbers that I plugged was $18,000 available cash to put into the mortgage or RRSP

Mortgage rate was set at 5% the RRSP investment rate was set to 4%

mortgage has 25 years to go & that I had 35 years to retirement

Result was 'pay off the mortgage first' & not to contribute to the RRSP

Each case is different, but that calculator was useful


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## mfd (Apr 3, 2009)

I still have unused room from when I was in school. This year I contributed $21k to try and used some of the room. Unfortunately this was a good year income wise so my unused contribution room increase by $20,500 for 2008. That means I only used $500 of my previous contribution room. In total I have $28k in contribution room for 2009. I plan on contributing another $21k. It seems like an odd thing to be disappointed about but it feels a little dirty having unused room.


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## michika (Apr 20, 2009)

I currently put 12% in both my RSP and TFSA, but intend to bump both to about 16-20% in a year or two.


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## Robillard (Apr 11, 2009)

I think I contributed about 10% of my gross income to my RRSP accounts and pension plan for 2008, and I still have contribution room left over from prior years. This year and last year I was paying down student loan debt relatively aggressively, plus, I have been trying to accumulate some emergency savings and save for some more immediate priorities than retirement; so, I haven't been maxing out my contributions.


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## Mintycake (Apr 13, 2009)

My hubby and I always maxed out. Where I work now we have a group plan (no matching) but I can put my bonus in there pre tax. Also, we have a share option plan so I purchase discounted company shares in the plan, which reduces my room a little.


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## George (Apr 3, 2009)

In percentage terms I'm below 10%, but that's deceiving because I'm in a good pension plan. For the past few years I've maximized my RRSP contribution every year, and I've already maxed out my TFSA room for 2009.

For the time being any extra cash above and beyond RRSP/TFSA/RESP contributions will be going toward our mortgage.


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## Ben (Apr 3, 2009)

Our RRSP room is currently maxed out. Normally we would continue to contribute 18% each and direct additional funds to the mortgage, but this financial uncertaintly has caused us to pull in the horns a little bit and concentrate on reducing risk in the here and now, rather than on long-term wealth.

We both have company matches for RRSP contributions to a certain low level, and are currently putting the minimum contribution to receive the maximum employer taxable benefit. The additional cashflow freed up by lower RRSP contributions (about 10% now, combined) has been building up in a couple of savings accounts / TFSA's until it reaches a certain "magic" number that I consider completely recession-proof. Will be there in a few months, and then additional cashflow beyond that will go back to paying down the mortgage. 

Once this financial uncertainty begins to ease a bit (job market and economic outlook, mainly), then we'll look at reducing the cash buffer in the savings accounts and putting it to work on the mortgage, catching up on the amounts of RRSP room that have built up since October when we instituted the "recession plan", and increasing RRSP contributions/deductions directly from paycheque back up to 18%.


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## stephenheath (Apr 3, 2009)

> I can only imagine those that contribute every year to RRSP's & TFSA's and take 25-years to pay off their mortgages


That is part of what I love about the TFSA. Theoretically I have 10 years left on my mortgage, which is 1.5% at the moment and has 4 years left before renewal. If I put the $10k per year into the mortgage as extra payments, it would be about 7 years total. But by putting it into the TFSA and getting 1.65% interest at the moment, I have the option of just renewing for a year at a time at the end of this term and using the TFSA to pay off the mortgage in year 7 if everything goes according to plan, but if something terrible happens, I've got a nice big emergency fund in the TFSA to help tide through. Before the TFSA, I'd have paid off the mortgage and relied on a line of credit for a big emergency.

The only reason I'm putting some excess into the RRSP right now is to cover the home buyer plan repayments... it's either put the money into savings or pay taxes.


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## Mockingbird (Apr 29, 2009)

ethos1 said:


> indeed & I did
> 
> the numbers that I plugged was $18,000 available cash to put into the mortgage or RRSP
> 
> ...


4% investment rate seems awfully low for someone who has 35yrs till retirement.


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## ethos1 (Apr 4, 2009)

Mockingbird said:


> 4% investment rate seems awfully low for someone who has 35yrs till retirement.


relative to todays rate of return & mortgage rates

That is why I advocate paying off the mortgage ASAP instead of trying to do everything at once and spreading money around paying mortage, TFSA & RRSP 

Does it not make sense to get rid of debt first then take the future years beyond that to do the retirement investing & save - or should it be the reverse to max on RRSP & TFSA's then any money left pay the mortage?

No one knows what the future holds, it may have 12 % mortgage rates and 10% average investment return rate * * it all depends on each persons individual case, needs & wants


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## Patricia (Apr 3, 2009)

We have only a small amount of room left between us as I am now retired 2 years so we have been depositing less than we used to in order to utilize the tax savings. Our focus has become contributing to our TFSA's.


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## The_Number (Apr 3, 2009)

Sorry if this sounds like a newbish question, but how can you be allowed to contribute as much as 15% of your income? My contribution limit for this year is 3.8% of my income, and I'm almost certain I don't make as much as many of you around here.


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## stephenheath (Apr 3, 2009)

Your RRSP contribution limit is 18% of your previous year's earned income to a maximum of ... I think it's $21,000, but don't quote me on that, I think it changed recently. And that's seperate for each person so a two income family could (if very well paid) have a maximum of $42,000.

The only reason I could see you having such low contribution room is because you got a massive raise (so 18% of last year is 3.8% of this year) or maybe you have a company pension plan... those contributions use up your RRSP room.


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## lb71 (Apr 3, 2009)

The_Number said:


> Sorry if this sounds like a newbish question, but how can you be allowed to contribute as much as 15% of your income? My contribution limit for this year is 3.8% of my income, and I'm almost certain I don't make as much as many of you around here.


The contribution limit is reduced by your pension adjustment. The contribution amount is also based on the prior year's income, so as Stephen mentioned if you got a substantial increase in salary the next year (eg, you just graduated and started working half way during the year) your contribution limit could be a smaller percentage of your income this year.

For example, say you earned $50k in 2007. You contribution limit for 2008 would be $9k (18%). Say you had a pension plan at work and your pension adjustment was $6k in 2007, your contribution limit would be reduced to $3k for 2008 (6%). Now say your salary increased in 2008 to $70k for whatever reason, now your $3k of contribution room is only worth 4.3%. (This ignores unused room from prior years.)


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## onomatopoeia (Apr 8, 2009)

I contibuted around 28% of my income this year, although it was above average for me...almost caught up on excess rrsp room.

I also made a few lump sum payments on my house.

My wife probably contributed 5% of her income, but she is building up large cash reserves for.....something. 

Next year will probably contribute about 20% which will get rid of most of my extra room...then onto the mortgage


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## ethos1 (Apr 4, 2009)

onomatopoeia said:


> I contibuted around 28% of my income this year, although it was above average for me...almost caught up on excess rrsp room.
> 
> I also made a few lump sum payments on my house.
> 
> ...


That was aggressive, all the same well done

Should you have a large tax refund for the huge 2008 contribution, what are your plans for the money, is it to put it back into the RRSP for 2009, into a TFSA, pay off debts or pay down the mortgage some more?


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## Mockingbird (Apr 29, 2009)

onomatopoeia said:


> I contibuted around 28% of my income this year, although it was above average for me...almost caught up on excess rrsp room.
> 
> I also made a few lump sum payments on my house.
> 
> ...


Very impressive.. 

"but she is building up large cash reserves for....something". You dont' know???


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## onomatopoeia (Apr 8, 2009)

Mockingbird said:


> Very impressive..
> 
> "but she is building up large cash reserves for....something". You dont' know???


You want to ask her???

We've talked about it lots, but have agreed to disagree. I like aggressivly paying down debt/rrsp's, she likes aggressivly having a huge stockpile of cash as a safety blanket "on case".

So with my cash I do my thing, and she does her thing with her money. We split the bills 50/50. I'm confortable taking all my extra money and paying off debt. 

In the end we talk about any major purchases and neither of us would buy something expensive without talking to the other, so I'm not scared of her going out and buying a fancy new car (although I'd drive it!)


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## AshleyT (May 1, 2009)

Note that a very high income earner might max out RRSP's every year, but the amount might not be a large percentage of their income. For example, if someone made $400k, but was only allowed to contribute $20k to the RRSP, then the answer to the poll for them would be 5%, the same as a big spender making $100k, but only putting away 5k a year into the RRSP. I don't know if anyone falls into the former income category, but I do notice that financial fora tend to attract high income earners/accumulators in general. A confounder for you all to consider.

Ash


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## Mockingbird (Apr 29, 2009)

AshleyT said:


> Note that a very high income earner might max out RRSP's every year, but the amount might not be a large percentage of their income. For example, if someone made $400k, but was only allowed to contribute $20k to the RRSP, then the answer to the poll for them would be 5%, the same as a big spender making $100k, but only putting away 5k a year into the RRSP. I don't know if anyone falls into the former income category, but I do notice that financial fora tend to attract high income earners/accumulators in general. A confounder for you all to consider.
> 
> Ash


Very good point, AshleyT


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## Alexandra (Apr 3, 2009)

Mockingbird said:


> I believe it depends on the individual's situation.
> There are online calculators to assist people with this process.
> https://www.retirementadvisor.ca/retadv/apps/mortrrsp/mortgrrsp.jsp?toolsSubMenu=family


I did this and it said I was better off investing into my RRSPs. I guess it really does depend on an individual's situation.


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