# Should I max out my RRSP?



## bds (Aug 13, 2013)

I'm not sure if I should contribute to my RRSP's limit now or save it for future, higher income years, looking for advice

I'm very early in my career and so far I'm moving up quickly in terms of income and expect that will continue for at least a few more years. I have the cash free at the moment to max out my RRSP this tax season but am considering whether to do that or save it for a future year when I will get more of a return for it.

2014 was 55k income, 2015 should be ~70k. I am on track to be a senior in the next 1-2 years which will mean ~85k. After that I expect the income growth will slow down.

I have ~20k contribution room, should I fill it this year or wait a couple years?


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## none (Jan 15, 2013)

Put it into a TFSA problem solved.


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## My Own Advisor (Sep 24, 2012)

I kinda like what none said. Max out TFSA, then if you have money leftover, contribute to your RRSP since you're in a decent income bracket. Don't overthink it.

Using both accounts and seeking to max them out over decades is a sure fire way to financial freedom.


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## banjopete (Feb 4, 2014)

Just to add confusion to the mix, why not max it out and put the tax return into your tfsa? win win no?


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## rikk (May 28, 2012)

bds said:


> I'm not sure if I should contribute to my RRSP's limit now or save it for future, higher income years, looking for advice ... am considering whether to do that or save it for a future year when I will get more of a return for it.
> 
> 
> > From the wording of your post, it sounds like you are thinking in terms of maximizing your tax return, in which case wait to claim the contribution ... keep in mind you are only deferring paying the tax, you will pay it eventually at a rate tbd. If you are thinking in terms of growing your contribution in an RSP tax shelter, then contribute now, and claim what you calculate as being a reasonable return per tax year going forward. As others have said, top up the TFSA first. If you're an investor, then RRSP/TFSA investment accounts preferably with sufficient funds to avoid any yearly fees.


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## Guban (Jul 5, 2011)

banjopete said:


> Just to add confusion to the mix, why not max it out and put the tax return into your tfsa? win win no?


No.
If the RRSP deduction is taken in a future year, then the tax return is greater due to the increased income. Your suggestion only allows the deduction at a lower rate. 
If you reverse the order and put the money in a TFSA, and later withdraw it and contribute to an RRSP in a year with a greater income, there will be more of a tax savings.


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## My Own Advisor (Sep 24, 2012)

This is my thinking as well Guban. Don't overthink it, max out the TFSA and you can always use TFSA or new funds to max out RRSP as income rises.


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## Oldroe (Sep 18, 2009)

You need to consider Pension, home ownership, TFSA, RESP,RRSSP , travel and very thing else to get a good answer on max this or max that. 

Work on your overall plan and you will get your rrsp answer.


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## youcanbuyhouse (Feb 14, 2015)

*Borrow money to put in RRSP*

Would be ok, can i borrow money and put in RRSP

1 benefit: reduce tax
2 benedit: use this money to buy a house (apply for 1st time buyer)


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## janus10 (Nov 7, 2013)

Part of the consideration should be, what will happen to that money that isn't contributed to your RRSP (assuming you DO max out your TFSA)? If you are likely to fritter it away, then put it away into your RRSP now, and take the deduction in later years.

Personally, I wanted to establish good habits and to me that means maxing RRSP's early in my career (TFSA's came much, much later for me). If you get into that good habit, you are ingraining the idea of pay yourself first. Less resistance to temptation of finding another use for that money.

Now, another option is to take the money you were going to put into your RRSP and put it into a non-registered account and invest in something you feel comfortable with if it was in your RRSP. Again, it gets you comfortable with the idea of putting money aside for your future self to use. Later you can make your contribution to your RRSP with that money (if there has been a capital gain, you will have to declare that as income as though you actually sold it before putting it into the RRSP).


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## bds (Aug 13, 2013)

Sorry, I should have given a little more info.

TFSA is maxed already. I have the funds invested in my non-reg account and would be transferring to RRSP to fill it.

So I suppose the question is, will the larger tax savings later be greater than the tax hit of having it in the non-reg now?


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## steve41 (Apr 18, 2009)

It seems to be the best approach.... max your RRSP.


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## none (Jan 15, 2013)

That's what I'm doing. My income last year was 11K (student) but this year it's about 75K. I just put in 22K into my RRSP and will be sitting on it until tax time 2016. That and all my banked up education credits means I'm not going to be paying much tax in 2015 which is pretty sweet.


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## Guban (Jul 5, 2011)

bds said:


> Sorry, I should have given a little more info.
> 
> TFSA is maxed already. I have the funds invested in my non-reg account and would be transferring to RRSP to fill it.
> 
> So I suppose the question is, will the larger tax savings later be greater than the tax hit of having it in the non-reg now?


Max out your RRSP. There is no tax hit inside the RRSP, and you can always take the tax savings later if you wish. If those are your only concerns. 

You may face significant capital gains taxes by transferring from non registered to registered, though, so take that into account. There is no point in paying those capital gains taxes if you are not claiming the deduction, since sheltering the dividends is not likely worth any substantial capital gains taxes.


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## CPA Candidate (Dec 15, 2013)

Putting $22k in an RRSP with 55k income is not ideal, especially if you figure you'll be making more down the road. Don't reduce your net income below $44k. You're not getting a tax benefit if you put the money in and take it out at the lowest marginal rate.

Also, what province are you in?


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## bds (Aug 13, 2013)

I'm in Ontario


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