# Maximise RRSP benefits



## b_foot (Dec 16, 2010)

Just want to be certain what I am going to do will maximise the benefits of RRSP contribution. Here is the info from my last year return: (making slightly more this year, not a whole lot)

line 150 total income is 117K
line 236 net income is 99K (which includes about 17K of RRSP contribution)

Knowing the federal bracket from 22% to 26% is at around $81K (year 2010), ideally, I should contribute enough RRSP to make line 236 at the same $81K bracket. Am I correct? 

I have about $36K contribution room for year 2011. I am in Ontario if that makes a difference. Thanks.


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## 0xCC (Jan 5, 2012)

You can find Ontario 2011 tax rates here: http://www.taxtips.ca/taxrates/on.htm. You appear to be squarely in the 43.41% bracket and have about $16k to take off your income before you would bump down to the next lower bracket at just over $83k which is the 39.41% bracket.

Edit: I think I misread your numbers a little but the point is the same. Any contribution you make to bring your income down to $83k will get you 43.41% back and after $83k down to 78k will get you 39.41% back.


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## natalie_d (Nov 25, 2009)

You can contribute up to your contribution limit. You don't have to use all the deduction in the year of contribution. Unused contribution can be deducted later.


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## uptoolate (Oct 9, 2011)

Good advice above. Natalie points out something that is sometimes not recognized by people. One of the major benefits of the RRSP is tax deferred growth so contributing to your maximum amount if you have the money maximizes this benefit. You can then claim all or part of the contribution in a later year. This is especially useful if your income is increasing significantly over time.


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## OptsyEagle (Nov 29, 2009)

b_foot said:


> Just want to be certain what I am going to do will maximise the benefits of RRSP contribution. Here is the info from my last year return: (making slightly more this year, not a whole lot)
> 
> line 150 total income is 117K
> line 236 net income is 99K (which includes about 17K of RRSP contribution)
> ...


Yes. All that is correct.


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## b_foot (Dec 16, 2010)

Thanks for all the good advices. The link is very helpful. The problem is where to find the money to contribute, that's a different problem  Thanks again!


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## Donny (Dec 14, 2011)

You may want to read http://www.retailinvestor.org/RRSPmodel.html which is an analysis of RRSPs and their benefits. It's fairly long, but very useful for correcting misconceptions that many people have.


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## the-royal-mail (Dec 11, 2009)

Your wording suggests you might not understand that our tax rates are marginal. I should point out that when you make more than the maximum in a bracket, you only pay the higher tax rate on the amount above the maximum. So if the limit is $81K (for example) and you make $82K, you do not pay the higher tax rate on $82K, you only pay the higher tax rate on $1K.

Are you aware of this?


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## b_foot (Dec 16, 2010)

the-royal-mail said:


> Your wording suggests you might not understand that our tax rates are marginal. I should point out that when you make more than the maximum in a bracket, you only pay the higher tax rate on the amount above the maximum. So if the limit is $81K (for example) and you make $82K, you do not pay the higher tax rate on $82K, you only pay the higher tax rate on $1K.
> 
> Are you aware of this?


Yes, I am aware of this. To maximise the effect of RRSP, I will attempt to make enough contribution to reduce my marginal tax rate.


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## b_foot (Dec 16, 2010)

Donny said:


> You may want to read http://www.retailinvestor.org/RRSPmodel.html which is an analysis of RRSPs and their benefits. It's fairly long, but very useful for correcting misconceptions that many people have.


I thought about the same thing but not in the same extent as what's on the article you pointed out. Now this got me thinking, will read the article once again later and play around with the spreadsheet. thanks.


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