# Severance Payment & RRSP



## carllecat (Aug 3, 2010)

Thanks


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## sharbit (Apr 26, 2012)

do you have another job lined up?
what money will you use to eat?

If that 55,000 is the only money you'll make this year and severance is considered employment income, you'll likely get a large chunk of the 7500 tax remittance back when you file taxes next year.


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## carllecat (Aug 3, 2010)

Thanks for the reply. 

I have money saved to live all right for a couple of months. That said, would it be a good idea to invest it all in RRSP?


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## balexis (Apr 4, 2009)

> should I just have the severance deposited into my banking account and be taxed at a 30% rate?


Like Sharbit said, there will be a 30% withholding tax on your 25k, but your effective taxation will be established at the end of the year based on your total annual income. It might not make sense to put it all in the RRSP, or at least to take the full deduction for 2013 if your marginal tax bracket is lower than what you expect to earn when you get a new job. Can you split the severance pay between RRSP and direct deposit in non-registered account? you might be able to do some cool optimization there.


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