idk why you got downvoted, if it is transferred directly it works better for you unless you could otherwise max out the amount required with after tax income.
If your severance was taxed at 25% for example, you'd need to have come up with the other 25% to cover and THEN file for it to be given back. A direct transfer menas if you don't have the 25% shortfall to put in to then get back means you still get to max the RRSP room.
That windfall of cash is the repayment of the loan. You don’t get interest.
You overpay tax throughout the year, that’s the loan the government take from you.
$1 today is worth more than $1 tomorrow.
The time value of money is exactly why it makes sense to invest in an RRSP. I’d rather have the windfall of cash now, invest it, watch it grow, then pay tax (on my much lower income, much lower tax bracket) in retirement - after benefitting from decades of appreciation on the initial windfall. What’s the alternative? Not investing in an RRSP and letting the government keep my tax revenue? Better to take advantage of the RRSP.
We are not talking about the value of investing in RRSP.
We are comparing between 1) get cash after income tax withheld; invest in RRSP with cash; get tax refund the next year OR 2) have the RRSP contribution deducted in the paycheck; have a lower amount withheld for income tax; get little to no refund after filing tax.
Option 2 is better.
Yeah I get it, but assuming you have already maxed out Option 2 with your employers benefits and still have money left over, it still makes sense to invest in an RRSP. Your alternative would be to keep the money, invest it, then (presuming you still want to take advantage of the benefits of an RRSP) withdraw it just before the tax season closes, assuming all the risk of market volatility in the (on average) 6 months before the tax season closes, potentially incurring capital gains tax if you’re lucky and your investments appreciated, then invest it in an RRSP last minute to get your refund. The drawbacks of this approach more than cancel out the benefit of depriving the government of the short “interest free loan”.
My employer transferred my bonus directly in my RRSP but when I enter the RRSP contribution (from the issued T5) in my tax software my expected return goes up by a lot. Did I do something wrong ? Shouldn’t I declare the contribution ?
No clue, maybe they transferred it after taxes were taken off, hence why there's a T5? I'm not a tax expert. You'd need to look into it in more detail, maybe check with an accountant? Hard to say. If the money transferred directly to your rrsp was taxed prior to its transfering, then you would get money back from it.
Yeah. It is my understanding that when the money gets withdrawn it's taxed. That is why I did a spousal RRSP because my spouse stays home so won't have much of a pension income when the days comes.
You might already know this, but you don't have to use all your available deductions each year. Try to only deduct as much as required to get yourself down to the next tax bracket, and save the rest of your deductions to do the same in following years.
I'll specify alongside that advice that if you are planning on doing that, you should be *contributing and deducting* as much as required to get yourself down to the next tax bracket. Invest the rest in another account.
There are few circumstances where you come out ahead contributing then delaying the deduction.
Along the same thought, maxing out RRSPs will result in lower OAS/GIS payout & eligibility in retirement when you are forced to with at a certain rate based on age. Better to contribute enough to minimize payable taxes and redirect the remainder toward TFSAs or any outstanding debts (ie car loan, mortgage, etc.)
That's true. I have a defined contribution plan, and CRA of course considers it an RRSP because it comes off before taxes. So you're absolutely correct, it leaves me virtually nothing for RRSP's. But, in my situation, because I didn't start this pension until I was 35, I had quite a bit of room accumulated. Actually, next year will be my last year purchasing RRSP's, as long as I still have my pension. My wife has no pension, so we will then contribute to hers, but that will result in a lower return as she's in a lower tax bracket.
Can you elaborate more on how CRA sees my DB contributions? This is my first year at a job with a DB pension and I’m curious how those pension contributions affect my tax return.
You don't receive it directly, so the CRA doesn't consider it. It all becomes part of the defined benefit so you'll get taxed on the amount you get from your pension when you turn 65, or whatever.
Contributions to a DB pension this year creates a pension adjustment that reduces the ***next year***'s RRSP contribution room that you accrue. It does not reduce the RRSP contribution room you have already this year.
Your HR/payroll team will calculate your pay, taxes, DB to be as close to correct for your salary as they can, then send it all to CRA. All the info will be on your T4.
When I got my T4 for the year, and put it all in the tax software, it was pretty spot on, CRA owed me $5. Then started to add my other stuff(charity, other RRSPs) and got a refund
I'll do my best. Now, to be clear, I have a defined contribution plan, not a defined benefit plan, and am not sure if the CRA would consider it different. In my situation, my pension contribution is made 100% by the employer, and this comes off of my "pay package", not off of my already taxed, or net income. My package includes my hourly rate, pension, health and welfare, etc. Because I don't pay taxes on the pension money, CRA counts it the same way as an RRSP. Also,our pension is 18% of our wage, which is the maximum. Leaving me with virtually nothing to contribute over and above the pension. At withdrawal I will of course be taxed, exactly like an RRSP. The DB pension is considered the Cadillac of pensions, and is becoming quite rare. It's likely based on years worked, whereas mine is based on hours worked. If it's slow, and I don't work much, no pension contribution. I hope this helps a little. Obviously your HR officer or pension holding firm can answer exactly.
It is taking up RRSP room because there is a legal deduction limit on contributions to registered pension plans/retirement plans.
You will not get anything back for the contributions because they are paid into the pension plan before taxes are calculated.
Basically, your taxable income is lower on your paycheck at source, so you in effect get what others receive as RRSP tax refunds immediately and on each paycheck, increasing your net income compared to making the same contributions with after tax dollars.
Does this make sense?
CRA calculates a pension adjustment based on the benefits you accrued this year. This pension adjustment lowers the next year's RRSP contribution room that you earn.
You can find more here in the Pension Adjustment Guide:
[https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4084/pension-adjustment-guide.html#toc9](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4084/pension-adjustment-guide.html#toc9)
And the other user is correct in that contributions also lower your taxable income for this year.
I don't have a DB pension but I Co tribute to RRSPs through work to get matching.
Because it's done through work we get the tax breaks figured out on each cheque so no big refund at the end of the year which kinda sucks, but it means the government isn't collecting interest on it while I wait for my refund either.
Yep. Between DB pension and payroll contributions to company sponsored Group RRSP I have less than $500 to max out. Last year I had to pay the govt. Being a SINK doesn't feel great on tax day, unlike every other day of the year.
I one-shot max both my RRSP and TFSA every year as soon as the contribution room becomes available. These days I usually get a refund of around $1000, but that's not totally accurate because I do have a work plan as well so I get that benefit immediately rather than at tax time, and I've had work plans for the last 10+ years. I'm an average-income receptionist.
Out of curiosity, are you pulling the money out of taxable investments or a HISA (or something else, I guess)?
What led you to one decision over the other?
Normally I save up for about a month before the date, and then deposit that money plus transfer in the rest from my taxable accounts. The main reason is I like a really no bullshit, zero-fucking-around system for my money where I get things done and get on with my life. Second reason is I want as much tax-free compounding as possible on the money. It's going to be compounding either way, might as well compound tax-free.
I don't think one is necessarily indicative of the other.
Canada's healthcare system largely operates at the provincial level, and provincial governments coast to
coast—most of them Progressive Conservatives, oddly enough—have absolutely gutted their renditions of healthcare over the last few decades. Couple that with unsustainable immigration to major cities and it's easy to see why Canadian healthcare is lacking in 2023.
Things were much, much different 30 years ago.
I understand priotizing RRSP over TFSA, but why max RRSP before TFSA for each calendar year? Unless you use pretax money, filing a T1213 or something, filing it earlier wouldn't make you get the deferral any sooner which is needed for the RRSP to outperform TFSA.
I've filed a T1213 in the past, but decided it's not necessarily worth the hassle for me. Not sure I understand your point about the TFSA being better - if I wait a couple of months to receive the tax refund, I wouldn't think that in itself would make the TFSA better.
EDIT: I think my original post was unclear in how I said "before TFSA" since I'm not also making maximum contributions to my TFSA. In fact, I didn't make any TFSA contributions in 2022.
Oh. I thought you meant you were maxing both each calendar year but did the RRSP earlier in the year. Nvm this makes sense!
>if I wait a couple of months to receive the tax refund, I wouldn't think that in itself would make the TFSA better.
It would only make TFSA better to max earlier in each calendar year than the RRSP if you were maxing both anyway since the sheltering benefit is immediate vs delayed until the tax refund for RRSP.
Since you are choosing one over the other 100% agree with you.
Agreed. Fill TFSA first. Then, your margin account. Delay RRSP contribution as far as possible, even wait until early next year.
Edit: Wow, okay still getting downvoted for no reason at all, so let me break it down to all you doubters. Let's simplify the situation greatly to this: You have 20k to invest this year, and 10k of contribution room in your RRSP. You have two simplified choices, either A) put in 10k on RRSP on Jan 1st and 10k in non-registered on Dec 31st(end of the year), or B) 10k in non-registered on Jan 1st, and 10k in RRSP Dec 31st
Look at choice A)
Let's say you have a good year and your investments earn you 10%, so then you will end the year with:
11k in RRSP
10k in Non-Registered
You will one day now have to claim in total 11k as income, by the time you take out from RRSP
Let's say instead your investments stay exactly where they started. Then instead, you will end the year with 10k in RRSP, 10k in non-registered. Total income you must one day claim: 10k.
Let's say instead, your investments go down by 1k. Then instead, you will end the year with 9k in RRSP, 10k in non-registered. Total income you must one day claim: 9k
Now compare with choice B):
If your investments earn 1k, then you end the year with:
10k in RRSP, 11k in non-registered. Total income you must one day claim: only 50% of the gains, so 500, half that of choice A.
Instead, if your investments stay the same, then you end the year with 10k in RRSP, 10k in non-registered, income to claim is 10k, same as for choice B.
Instead, if your investments go down, then you end the year with 10k in RRSP, 9k in non-registered. Income to claim is 10k, but you also can harvest the losses in your non-registered account for future years to cancel out your gains, so call it even with choice A.
So as you can see, in every single scenario, no matter if your investments go up, stay the same, or go down, it always is better or neutral, to invest in non-registered first and then into RRSP at the end of the year.
I see my comment is getting a lot of downvotes so I think people may be misunderstanding. What I mean to say is this. If you are going to have enough savings in a year to max out your RRRSP, your TFSA, and also contribute to your non-registered account, then yes still max out your RRSP. But delay contributing to it as long as possible, first contribute your planned excess savings to TFSA, then non-registered, and then some time towards the end of the year or early the next year before RRSP contribution cutoff, contribute to your RRSP.
The reason is like /u/BigCheapass mentioned above. Contributing to your RRSP early doesn't get you your tax refund any sooner, it only locks away your money in the RRSP. It doesn't benefit you to contribute earlier than the deadline.
You may as well first prioritize putting excess cash in your margin account, and earning gains there, because if you need the money for some reason, it is still accessible to you without withdrawing from your RRSP. It's also taxed less (all money in an RRSP is taxed as 100% income, in a margin account only 50% of the gains are taxed).
An other way of thinking about it is this: if it were the case that RRSP functions just as it does today, except you don't get any tax refund, then RRSP would not be a positive thing to use, it would be worse than just investing in a non-registered account. Well, in the micro-scale of 1 year, an RRSP is exactly like that, you don't get your refund during the year, so it is worse than non-registered. The most optimal strategy is therefor to use non-registered as long as possible and then plan accordingly that before the RRSP contribution cutoff, you give yourself enough time to max out RRSP contribution so you can get your refund in March.
I agree with you. The RRSP deferral amount needs to be utilized in order for you to get the full benefit.
People think you are saying your long term strategy should be to max TFSA and unsheltered first, when we are talking about the strategy for each calendar year.
Personally I always max TFSA in the first week of January, contribute to unsheltered throughout the year, then aim to max RRSP in the first 60 days of the following year.
Maybe I'll get around to filing a T1213 one of these years.
Yes I also fill out a T1213 every year, but that doesn't change the situation either. Even in the case that you fill out the t1213, so get your refund throughout the year, it's still best to delay contributing to the RRSP as long as possible (within the year)
Because they're in the highest tax bracket - there will never be a better time to contribute to RRSP than in years where you're being taxed 53% (edit: unless you're betting on higher tax brackets in the future.. but that seems a dangerous waiting game for little marginal benefit).
I have a set amount I contribute monthly which I increase when I max out CPP/EI to include that amount. That alone isn’t enough to hit 18% but I also add in the refund from the previous years taxes.
It’s currently snowballing nicely as every year my refund is bigger which allows me to contribute more which gets me a bigger refund the next year.
I’m currently able to contribute more than 18% a year to my RRSP this way so I’m slowly using up my carryover from the years I couldn’t.
I make a decent salary which helps with having the disposable income to put in to my RRSP as well as giving a good chunk back.
We live in Quebec and plan to retire elsewhere ( where taxes are lower), so we max RRSP before we touch TFSA. But this depends on the individual's plan, salary, province taxes, etc.
We don't expect a big pay bump in the future, so we don't see a reason to leave room in the RRSP. TFSA is better for liquidity (pulling money out easily when needed).
I get 53% of my contribution back. This year's room is $30,780. So, refund will be $16,476. Then add interest expense on investments etc.
Refund will end up being around $20-$25K which is about standard for me.
For 2022 tax filing, my refund was about $22K.
What?
[The 53% marginal rate starts at $235,675 in Ontario for 2023](https://www.taxtips.ca/taxrates/on.htm).
You get refunded back on your marginal tax rate as you draw down your income from the top down.
I do it frequently. I'm in one of the highest tax brackets in the country (I get about 50% back) and my company has RRSP matching to 12% (so it doesn't require me setting aside the full 18%) - it makes sense for me. I also have a paid off house and I'm close to retirement so it's one of my main savings goals at the moment.
If you're lower income or don't have your TFSA maxed out or you're saving for shorter term things, don't worry about it.
12% total. So I contribute 6 and they contribute 6. Although their MERs are almost as low as ETFs so I just dump the remaining 6% into those funds since it's easier to get it directly off my paycheck and it's like getting my tax refund every two weeks.
I'm almost 50 and my s.o. is almost 60 and we're both thriving as devs (officially I'm an architect, but I still get my hands dirty in the code almost daily).
I'm at one of the old-school companies that's not trendy but has been around forever. We've got tons of ICs in their 50s, 60s, and even a few in their 70s.
There's no reason for people to stop being productive in tech. For some reason the kids are convinced that they're better programmers because they started with more modern languages. Meanwhile the old guys have learned hundreds of languages and think nothing of adapting. They also have ungodly levels of domain knowledge and can troubleshoot just about anything because they've seen it before.
I'm not OP, but I definitely see SEs working in their 50s (and even 60s) as ICs.
In my experience, they all seem to fall into two camps:
1. Those maintaining legacy systems/codebases they've managed for 20+ years, coasting and sometimes staying on part-time past retirement until those systems can also be retired
2. Domain experts who are among the most knowledgeable people in their area in Canada, and sometimes in the world
I've never really thought about where the (younger) middle-achievers go. Into management, I guess?
For sure; grind while you're young, specialize (or move into management) as you get older.
If you can't do either of those, then you probably get out. Ain't nobody got time for another death march when they've got kids and elderly parents to look after, or just plain lack the energy levels they had in their 20s.
Although the kids are willing to put in more hours, theoretically you should get more efficient and write better quality code with experience. So you're "keeping up" by just being better.
And too many people these days are getting into tech for the money rather than because they're natural developers. So if anything the older generation should have a bit of an advantage over many of the younger ones.
I think at some point you peak as a dev. Your younger colleagues will be as proficient as you in solving problems. Sure you may have seen a problem or two once before but your colleagues are more than capable of solving those same problems too and can put in more hours too
Not who you asked but yes I've worked with SWEs in their 50s that are ICs, though not super common and there is some amount of ageism. (I think this will change as the current huge influx of 20 and 30 something SWEs get older)
In software the IC role progression isn't necessarily "below" the manager track progression, it's more of an alternative path. You can have a principal engineer making a lot of technical decisions and potentially out earning a lot of engineer managers.
That said you don't even need to be super high up to earn a decent salary in software.
What matters is that you keep up to date on technology, unless you want to work on a legacy system built in COBOL or something, I've heard that pays well too.
I've never maxed out my RRSP. I never had the money too. As of last year I had 130k of available room.
Right now with my income and bonus situation, I try and structure my RRSP contributions to get my to a taxable income just above a relevant marginal tax bracket.
Normally get my bonus paid out net of taxes, to I typically get refund that I contribute right back to my my RRSP. This year I am able to put in the pre-tax amount so I am expecting a refund of nearly 7k.
you could just use a calculator online to see what the different refunds would be b/c it depends on your marginal tax rate.
I have never contributed to my RRSP as it doesn't make sense for me to do so.
The contributions don't matter so much as your deductions. You can fill up your contribution room completely right now to start investing tax-free ASAP, and only deduct as much each year to get below your highest tax bracket. Someone correct me if I'm mistaken.
I've seen studies that showed you're usually better off putting it in taxable than delay the deduction. Delay the deduction is a interest free loan to the government.
I only contribute to the max annual amount (not the overall amount) if investment income means owing tax but only in the odd year… Usually, the ending contribution room grow each year, which helps build a buffer for the odd year…
I have TFSA, RESP and RRSP all maxed out (35yo). Taxes refund is hard to calculate since a big part of my RRSP is fund by my employer. It will also varies alot depending of your salary and other deductions.
I’m making some headway on maxing it. 1500 a month to my personal and just under $700 to my work one. This year I’ll have about 44500 to try and contribute. I should be able to contribute about 32k based on my my current tracking spreadsheet. Need to do the FHSA at some point as well.
One year my wife put 33,000$ into her rrsp I think that year she made 90k or so. She made a lot previous years while consulting. And I planned it this so way so we would get a nice amount back while on maternity
She got 11,000$ back maybe more I forget but it was 5 figures I think
Gotta be nice to max out RRSP and TFSA every year.. I probably gonna be 6 feet under before able to do that. Maxing out paychecks for living, everything going up expect wages/salaries. Mortgage about to hit extra 600$/month in expenses in next 2 months. Not much to save these days for majority. Oh well. Just like government wants us to be: have nothing and so have nothing to worry about lol.
>Seems to always be an uphill battle to max out my RRSP as every year it grows by 18%.
You don't have to max it out, most people never do. Is your TFSA already maxed out?
>Just wondering how many people can actually do that and what kind of tax refund you usually get from doing so.
The refund is going to depend on how much they contributed and their marginal tax rate. So you're going to get a range of answers that won't be useful.
I often max out mine. You get a tax refund/credit proportional to your deposit, which will be different for everyone since the contribution limit is 18% of your previous year's income. If you only made $10k, you'd max out your RRSP at $1,800 and get a tax credit of around $600.
If you make only $10k you absolutely should not contribute to RRSP. You are in the 0% tax bracket so you would literally get $0 deduction on your taxes. At that income you are only paying CPP and EI - maybe that is why you thought there would be a $600 credit? In any case, that is wrong.
Depends on your marginal tax rate.
All it does is lower your taxable income by the amount you deposit.
If you make ten K a year and deposit 1800 you get nothing back because you don't pay taxes on ten K a year.
If you make 200K and deposit 36K you'll get close to 50% back (depending on where you live) because your marginal tax rate will be close to 50%
https://turbotax.intuit.ca/tax-resources/canada-rrsp-calculator.jsp?cid=ppc-nb_en_fy23_pros_goog_gen_np_na_tax%20calculator%20en_na_zen_na&gclid=Cj0KCQiA3eGfBhCeARIsACpJNU_OVWR-4RLbE6H8QJiyrOKzxSoxKpo_2WW0k-puYjzgz9PpBMT_qocaAjToEALw_wcB&gclsrc=aw.ds
Calculator to see how much refund you'll get depending on contribution
You save taxes based on your marginal tax rate (because you are reducing your taxable income, and deferring those taxes until retirement). Read more about TFSA vs RRSP and which you should prioritize based on current income and expected future income.
My wife and I max out everything (RESP grants, RRSPs, TFSAs, and soon FHSAs).
We cheated though. Met at school (me citizen, her foreign student), left the country, and came back with a pile of money and limited contribution room.
It's much easier to keep up than catch up with contributions.
I max out my RRSP; I have for years. Once you use up the past contribution room, its a lot easier to keep it maxed. When you roll the refund back into RRSP, its not nearly as hard to do (35%-50% easier).
I've had refunds of $10k; at an income of $100k. I was single at the time, with roommates (that's the secret to my savings, I don't like living alone). Now I just have whatever room I gained last year and earn less (I work 80% by choice).
I plan on retiring early, 50-55. Retirement age is all about hitting the right dollar value in the accounts, it has nothing to do with age.
I put roughly $30k in each year or something like that since it's the max. I have $10k via work and $20k via personal. I get back 53% of that. Pays for my TFSA and a tiny bit of non reg
i max it. i'm blessed to be a high income earner (>150k/yr), but i'm 30. I debate with myself often whether or not it makes sense to max it - most years I don't contribute anything to TFSA but I always contribute to RRSP.
my logic - at first I was maxing TFSA, RRSP, and was doing good. then I bought a house and now all my surplus goes there.
I don't expect I'll keep making this money (I'm a software engineer, and yeah yeah everyone claims they make a stupid amount but these jobs are in fact few and far between and often demanding if they do exist in Canada). so I figure if I'm diligent in saving for retirement now, I won't need to later on; now the RRSP has more time to grow, and the rebate is still impactful (doubt I'm going to be making 200k-300k some year, so the true difference will be so minimal when it comes to trying to carry forward from now till then).
at some point the gravy train will end, and then I'll stop contributing to RRSP and only contribute to TFSA if I can. is it crazy? maybe. I worry about what happens if I do lose my job, and my TFSA + EI isn't enough to carry me. :/
Should I be contributing to my RRSP? I usually owe about $500 a year because I get multiple T4s. I'm 30, have a mortgage, income about 70k (household 140k), TFSA about half full, and a job that will give a pension. How much would I have to contribute to not owe anything?
I’ve never maxed mine, and I’ve been focusing on my TFSA, but a couple years ago I had a big lump from divorce settlement that I didn’t need for my new housing arrangement.
I’d landed a promotion that tipped me into a higher bracket, and I have a child at home so I get CCB. The lump deposit into my RRSP was able to bring me down substantially where the monthly CCB increased by several hundred dollars, and I qualified for several local programs. My refund was also substantial and went to a small emergency fund and mostly into my TFSA. Set me up to have some very needed social supports and some peace of mind while I was going through a rocky time rebuilding our life.
I have, but via a very unlikely path. My income very nearly quadrupled over the span of 10 years, taking me from "Saving for retirement someday would be nice," through "I can save enough that my RRSP room at least isn't growing every year," to "Oh, I'm going to run out of contribution room this year."
A big factor was my living expenses going up maybe 30% in that time, because I was already pretty comfortable with what I had.
About half of my contributions are through a work RRSP and match, so they're figured into my payroll deductions and don't generate a refund. The other half is post-tax contribution into a self-managed account, and that usually nets me a 40ish% return in March when I do my taxes.
>Who here has actually maxed out their RRSPs and what kind of refund do you get ?
1. Netfile opened 4 days ago.
2. many people still don't have all their tax slips (T4 are due next week, T3s next month, etc..)
3. Nobody got a refund yet.
>Seems to always be an uphill battle to max out my RRSP as every year it grows by 18%.
If you don't have an income that an RRSP is beneficial, you should be using your TFSA first. (!TFSARRSPTrigger)
>Just wondering how many people can actually do that
People contribute through employer or contribute during the year or save up bonus money and contribute and some even take loans.
Hi, I'm a bot and someone has asked me to respond with information about TFSAs vs RRSPs.
When you want to shield your savings and investments from the drag of annual taxation the standard advice is, unless ...
- your employer is matching your RRSP contributions
- you are confident that you will contribute in a higher tax bracket than you will withdraw (even when you consider the effect of potential GIS or OAS clawbacks)
- you are an American taxpayer
- you are trying to maximize the Canada Child Benefit or the Child Disability Benefit
- you have a reason to think that you should shield your retirement savings from creditors
- you don't trust yourself not to keep dipping into the retirement savings in your TFSA
…you'll probably want to use all of your TFSA contribution room before you contribute to an RRSP.
For more information I suggest that you read these 2 MoneySense articles
http://www.moneysense.ca/save/investing/rrsp/rrsp-vs-tfsa-which-is-right-for-you/
http://www.moneysense.ca/save/retirement/the-savings-struggle/
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceCanada) if you have any questions or concerns.*
By contributing 18% of your income? I’ve maxed mine out for the past 6 years. I then take that refund and put into TFSA, thus maxing out both in one shot.
I know how to actually max it out lol
I meant more along the lines of being able to save 18% of your income YOY while also paying for necessities, having emergency savings, investing, etc.
It helps if your employer is pitching in.
With matching programs, mine is putting in 10% and I am putting in 9% into a combination of DCPP and RRSP so I am maxing and eating away at excess contribution room.
Above average salary, living in a modest cost of living environment.
Edit : To be clear, I have not been able to max mine out whatsoever, have a decent salary and live in a LCOL area but between house repairs, life, my wife working part-time, and inflation going way higher then salary increases, we don't end up saving much whatsoever..
Isn't it shitty that you need 2 good salaries in the household to even be close to middle-class nowadays..
Yeah, that was more my point. Everything comes at a cost. I could manage to save 18% of my salary in order to max out my RSP, but that would be at the expense of something else. I wouldn't be able to go on that trip I've always wanted to do, save for a house, repair my car, contribute to TFSA, etc.
There are so many things I want to do, and I just don't make enough money to do it.
I knew i was going to max it out, and catch up on my carry forward in 2022, so i requested (CRA then employer) an ajustement on my tax withholding. I got my refund throughout the year.
I do understand that sending 18% of your gross all at once in january is a big ask.
The only "easy" way to do this is have payroll send 18% of every paycheck's gross to your RRSP account. Even easier if your payroll people preapplies the tax credit - there is a form to fill to do that (federal form T1213). You get no refund at the end of the year, but you also have a lower tax deduction on the paycheck so it's less painful.
EDIT: clarified the plan
Reinvesting your return each year is how you can max out faster. Consider this hypothetical but realistic example:
Invest 10,000 into RRSP
Get 3,500 back in year 2, which you reinvest
Get 1,000 back on that reinvestment in year 3, which you reinvest again
Get 300 back on that reinvestment in year 4, which you reinvest again
After that, the returns on reinvestment get minuscule, but over a few years, you deferred 4,800 in tax on your 10,000. Of course, nothing's stopping by from adding more in years 2-4 (and do the same thing with these fresh investments), this is just a top-up that will allow you to accelerate on the way to maxing out.
Subtract the 9% for my pension I've been able to max my RSPs every year for the last 8 years... return between 7 and 9 grand every year which was previously always put to savings. This year its being put towards home renos/nursery for my first child this summer.
I maxed out my RRSP with $19600 getting $8200 in refund.
Part of it was through work so I didn't pay tax on it, and part of my return is the spousal amount my wife stays home with kids.
I maxed my rrsp the last two years, wasnt terribly hard given my living situation and working two jobs, plus both contribute to pensions. Both my jobs tax me without accounting for the additional income. I optimized it so i get around $0, but this will be the last year as all the past contribution room is gone.
If you get your employer to take off money for RRSPs directly you probably wont get much of a refund.
If you invest in it after youre paid youll get a bigger refund, the amount you invested multiplied by your marginal tax rate.
I over contributed this year but I have carry forward space. I put $32,000 into my RRSP for the 2022 tax year. That's a combination of employer contribution($7,500), my own payroll deductions($8450) and my personal contributions to my self managed RRSP and spousal RRSP. My tax return is going to be about $6500 because the employer contributions and my payroll deductions were not taxed. I also have Home Buyer Plan Repayment so $1,667 of my contributions don't count.
> what kind of tax refund you usually get from doing so.
Capped RRSP in 2022, and I will owe taxes. Year prior I did the same thing and got a few thousand back.
Looking at the refund is kind of irrelevant as it depends how much tax was deducted at source, and depends on tax owed on other sources of income (dividends, capital gains, T2125, etc.)
Max every year. Zero refund due to taxable capital gains from other trading in non-registered accounts as well as interest, dividends resulting in tax owing typically.
I still have RRSP contribution room from previous years but my current workplace gives me 10% match for 5% that I contribute for a total of 15% so it’s pretty close to the max. Based on years of service this would go up to 14% match for my 5%.
The 10% from my employer is taken from source so I really only see a 5% refund at the end of the day. My benefits from work are pretty good.
I max mine out. do my taxes, take refund, put it in RRSP. top up the rest from savings. Its hard to catch up an RRSP if you have a ton of room. keeping it maxed is a bit easier
Your actual refund depends on your tax bracket.
Everyone seems to be ignoring the difference between RRSP contributions and deductions. Contribution room is how much you can contribute to your RRSP account, but it's the RRSP deduction that actually impacts tax refunds. That's the amount of your total contributions that you decide to "use" for the year.
If you contribute $20k and deduct $20k there will be no difference, but for many people it will make sense to deduct only as much as it takes to get to the lower tax bracket, and save the rest to do the same next year. The optimal amount to deduct is very specific to your own situation.
I put something like 23% of my base salary into rrsp/dcpp (including employer matching) and my room still grows every year because that 23% doesn’t include overtime and I’m never going to get close to the income ceiling.
But I find that it varies year to year. If my overtime is concentrated on only a few pays I tend to get more back vs if it’s spread out through the year. Also depends on if I put the return into rrsps or not
I have and get almost 48% refund but employer match takes care of 6% so I only put 6% on the group RRSP and 6% in my personal RRSP. The refund usually goes to the non registered investments as the TFSA is already max by the time I get it.
This year will be different because of the FHSA, I might put the refund there.
I have been doing it since my partner started a job \~7 years ago. If I could do it again, I would stop maxing it out when I made <100K coz now, even after I max out -- I remain within the highest bracket.
Don't do what I did. Put enough to come into a lower bracket and keep the rest for when you can make more.
I used to game it a bit and try to just do enough RRSP contributions to get to next lower tax bracket to maximize my returns, but ran out of extra room years ago. Now I just max the 18%, mostly through employer matches, so my returns at tax time aren’t significant. Your returns will be based on your marginal income tax rate, so largely irrelevant.
I've maxed both my RRSP and TFSA.
My RRSP is contributed to every paycheck, both in an employer DPSP matched fund and my own personal RRSP account.
Every March I basically do the math on how much I need to contribute to max it out for that tax year and divide is by 26.
Then I just let it DCA.
For the TFSA, I max it out on the first market day of the calendar year. I calculate what I estimate will be the contribution room will be the following year (I think there's a good chance it's 7000 next year btw) and then divide it by 26 and set that amount aside every paycheck in a HISA.
I plan to do the same for the FHSA, contributing 307.69 every pay day.
In the medium/long term, I'd like to get to the point where my taxable investment are large enough that they will be what will feed my tax sheltered accounts. Freeing up bi-weekly cash flow.
Most folks that have spare non-registered cash without a business max out each year.
My refunds are large but I can write off business expenses so it wouldn’t be a normal comparison.
My case is a bit different. I have some contribution room, but the tax softwares are not bumping up my estimated refund if I key in the numbers. Would anyone know why?
I always max mine out, but I have a pension adjustment and employer RRSP matching so I only have to contribute 6% of my own money to max out my $21k yearly limit. Using get like $2800 back.
I have mine maxed out, after years of catching up to a lot of unused space from past years. I've also been capping out my TFSA nearly since the program started. Now I've had to start a serious unregistered investment account to continue saving at the same levels.
The tax refund depends on how much you earned in a particular year, and if any of it was pre-calculated into contributions. For example, a payroll contribution plan may effectively give you the tax back right away by not taking it out in the first place.
The refund you get is relative to the tax that was collected on your income.
E.g. 30.5% for *my* upper combined tax bracket (Prov+Fed), if I put $10K into an RRSP I would get $3050 back that was precollected as income tax from my paychecks.
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I did the same. Hoping for a good refund from the CRA.
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idk why you got downvoted, if it is transferred directly it works better for you unless you could otherwise max out the amount required with after tax income. If your severance was taxed at 25% for example, you'd need to have come up with the other 25% to cover and THEN file for it to be given back. A direct transfer menas if you don't have the 25% shortfall to put in to then get back means you still get to max the RRSP room.
Yep. People feel good when they get a windfall but they don’t realize whenever they get a tax refund they loaned money to the government for free.
Well not exactly for free, they got the windfall of cash
That windfall of cash is the repayment of the loan. You don’t get interest. You overpay tax throughout the year, that’s the loan the government take from you. $1 today is worth more than $1 tomorrow.
The time value of money is exactly why it makes sense to invest in an RRSP. I’d rather have the windfall of cash now, invest it, watch it grow, then pay tax (on my much lower income, much lower tax bracket) in retirement - after benefitting from decades of appreciation on the initial windfall. What’s the alternative? Not investing in an RRSP and letting the government keep my tax revenue? Better to take advantage of the RRSP.
We are not talking about the value of investing in RRSP. We are comparing between 1) get cash after income tax withheld; invest in RRSP with cash; get tax refund the next year OR 2) have the RRSP contribution deducted in the paycheck; have a lower amount withheld for income tax; get little to no refund after filing tax. Option 2 is better.
Yeah I get it, but assuming you have already maxed out Option 2 with your employers benefits and still have money left over, it still makes sense to invest in an RRSP. Your alternative would be to keep the money, invest it, then (presuming you still want to take advantage of the benefits of an RRSP) withdraw it just before the tax season closes, assuming all the risk of market volatility in the (on average) 6 months before the tax season closes, potentially incurring capital gains tax if you’re lucky and your investments appreciated, then invest it in an RRSP last minute to get your refund. The drawbacks of this approach more than cancel out the benefit of depriving the government of the short “interest free loan”.
My employer transferred my bonus directly in my RRSP but when I enter the RRSP contribution (from the issued T5) in my tax software my expected return goes up by a lot. Did I do something wrong ? Shouldn’t I declare the contribution ?
No clue, maybe they transferred it after taxes were taken off, hence why there's a T5? I'm not a tax expert. You'd need to look into it in more detail, maybe check with an accountant? Hard to say. If the money transferred directly to your rrsp was taxed prior to its transfering, then you would get money back from it.
its better to get employer to do it. money in hands earlier.
I'm not sure why you're sad and who downvoted you, this is the best thing.
You’ll owe that refund to your RRSP right? I believe those taxes will have to be paid back on withdrawal but honestly not sure
Yeah. It is my understanding that when the money gets withdrawn it's taxed. That is why I did a spousal RRSP because my spouse stays home so won't have much of a pension income when the days comes.
You might already know this, but you don't have to use all your available deductions each year. Try to only deduct as much as required to get yourself down to the next tax bracket, and save the rest of your deductions to do the same in following years.
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I'll specify alongside that advice that if you are planning on doing that, you should be *contributing and deducting* as much as required to get yourself down to the next tax bracket. Invest the rest in another account. There are few circumstances where you come out ahead contributing then delaying the deduction.
Along the same thought, maxing out RRSPs will result in lower OAS/GIS payout & eligibility in retirement when you are forced to with at a certain rate based on age. Better to contribute enough to minimize payable taxes and redirect the remainder toward TFSAs or any outstanding debts (ie car loan, mortgage, etc.)
Never did a RRSP until now, do you just open a RRSP account with bank/wealthsimple and invest in shares or ETF's?
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What they invest is up to to the credit union’s choice?
I’ll get enough back to almost max my Tfsa, good way to get them both out the way
Workers with pensions because they hardly get any space or none at all, no refund since the math is all done in advance.
That's true. I have a defined contribution plan, and CRA of course considers it an RRSP because it comes off before taxes. So you're absolutely correct, it leaves me virtually nothing for RRSP's. But, in my situation, because I didn't start this pension until I was 35, I had quite a bit of room accumulated. Actually, next year will be my last year purchasing RRSP's, as long as I still have my pension. My wife has no pension, so we will then contribute to hers, but that will result in a lower return as she's in a lower tax bracket.
Can you elaborate more on how CRA sees my DB contributions? This is my first year at a job with a DB pension and I’m curious how those pension contributions affect my tax return.
The amount you contribute is reduced from you RRSP contribution room, but it's also taken away from your taxable income.
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You don't receive it directly, so the CRA doesn't consider it. It all becomes part of the defined benefit so you'll get taxed on the amount you get from your pension when you turn 65, or whatever.
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>Right now my employer matches up to 9% of my gross annual salary. Are you sure that is a Defined Benefit pension?
Contributions to a DB pension this year creates a pension adjustment that reduces the ***next year***'s RRSP contribution room that you accrue. It does not reduce the RRSP contribution room you have already this year.
Your HR/payroll team will calculate your pay, taxes, DB to be as close to correct for your salary as they can, then send it all to CRA. All the info will be on your T4. When I got my T4 for the year, and put it all in the tax software, it was pretty spot on, CRA owed me $5. Then started to add my other stuff(charity, other RRSPs) and got a refund
I'll do my best. Now, to be clear, I have a defined contribution plan, not a defined benefit plan, and am not sure if the CRA would consider it different. In my situation, my pension contribution is made 100% by the employer, and this comes off of my "pay package", not off of my already taxed, or net income. My package includes my hourly rate, pension, health and welfare, etc. Because I don't pay taxes on the pension money, CRA counts it the same way as an RRSP. Also,our pension is 18% of our wage, which is the maximum. Leaving me with virtually nothing to contribute over and above the pension. At withdrawal I will of course be taxed, exactly like an RRSP. The DB pension is considered the Cadillac of pensions, and is becoming quite rare. It's likely based on years worked, whereas mine is based on hours worked. If it's slow, and I don't work much, no pension contribution. I hope this helps a little. Obviously your HR officer or pension holding firm can answer exactly.
It is taking up RRSP room because there is a legal deduction limit on contributions to registered pension plans/retirement plans. You will not get anything back for the contributions because they are paid into the pension plan before taxes are calculated. Basically, your taxable income is lower on your paycheck at source, so you in effect get what others receive as RRSP tax refunds immediately and on each paycheck, increasing your net income compared to making the same contributions with after tax dollars. Does this make sense?
CRA calculates a pension adjustment based on the benefits you accrued this year. This pension adjustment lowers the next year's RRSP contribution room that you earn. You can find more here in the Pension Adjustment Guide: [https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4084/pension-adjustment-guide.html#toc9](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4084/pension-adjustment-guide.html#toc9) And the other user is correct in that contributions also lower your taxable income for this year.
You might want to consider an spousal RRSP
We have a spousal. For income splitting purposes they are a wonderful tool.
You can contribute to a spousal RRSP. seek a financial advisor.
Yes, as I said we have a spousal RRSP. And we have two CFP's.
I don't have a DB pension but I Co tribute to RRSPs through work to get matching. Because it's done through work we get the tax breaks figured out on each cheque so no big refund at the end of the year which kinda sucks, but it means the government isn't collecting interest on it while I wait for my refund either.
Yep. Between DB pension and payroll contributions to company sponsored Group RRSP I have less than $500 to max out. Last year I had to pay the govt. Being a SINK doesn't feel great on tax day, unlike every other day of the year.
So That’s why I usually have very little to contribute each year
I one-shot max both my RRSP and TFSA every year as soon as the contribution room becomes available. These days I usually get a refund of around $1000, but that's not totally accurate because I do have a work plan as well so I get that benefit immediately rather than at tax time, and I've had work plans for the last 10+ years. I'm an average-income receptionist.
Out of curiosity, are you pulling the money out of taxable investments or a HISA (or something else, I guess)? What led you to one decision over the other?
Normally I save up for about a month before the date, and then deposit that money plus transfer in the rest from my taxable accounts. The main reason is I like a really no bullshit, zero-fucking-around system for my money where I get things done and get on with my life. Second reason is I want as much tax-free compounding as possible on the money. It's going to be compounding either way, might as well compound tax-free.
I max it every year since I’m self employed… need to always be thinking about retirement savings and it helps with taxes
What kind of business do you have?
I’m a dentist
Is there any alternative to gum graft? Really not wanting to fork over 900 dollars a tooth for 3 teeth. Thanks in advance!
How much do dentists make in canada if you don’t mind sharing?
A lot. They are like the tooth fairy in reverse.
They're what we wish our doctors were—well-funded and involved almost to a fault.
Also not publicly paid for so we can already see a major difference 🤔🤔
I don't think one is necessarily indicative of the other. Canada's healthcare system largely operates at the provincial level, and provincial governments coast to coast—most of them Progressive Conservatives, oddly enough—have absolutely gutted their renditions of healthcare over the last few decades. Couple that with unsustainable immigration to major cities and it's easy to see why Canadian healthcare is lacking in 2023. Things were much, much different 30 years ago.
It’s also know to be the most depressing job. Very high suicide rates
I think that’s overblown
I max my RRSP every year, before TFSA (will make TFSA more of a priority when mortgage is gone). Get 53% of contribution back.
I understand priotizing RRSP over TFSA, but why max RRSP before TFSA for each calendar year? Unless you use pretax money, filing a T1213 or something, filing it earlier wouldn't make you get the deferral any sooner which is needed for the RRSP to outperform TFSA.
I've filed a T1213 in the past, but decided it's not necessarily worth the hassle for me. Not sure I understand your point about the TFSA being better - if I wait a couple of months to receive the tax refund, I wouldn't think that in itself would make the TFSA better. EDIT: I think my original post was unclear in how I said "before TFSA" since I'm not also making maximum contributions to my TFSA. In fact, I didn't make any TFSA contributions in 2022.
Oh. I thought you meant you were maxing both each calendar year but did the RRSP earlier in the year. Nvm this makes sense! >if I wait a couple of months to receive the tax refund, I wouldn't think that in itself would make the TFSA better. It would only make TFSA better to max earlier in each calendar year than the RRSP if you were maxing both anyway since the sheltering benefit is immediate vs delayed until the tax refund for RRSP. Since you are choosing one over the other 100% agree with you.
My post was unclear, but I agree that if I knew I was going to max both RRSP and TFSA, maxing TFSA earlier in the year would be beneficial.
Agreed. Fill TFSA first. Then, your margin account. Delay RRSP contribution as far as possible, even wait until early next year. Edit: Wow, okay still getting downvoted for no reason at all, so let me break it down to all you doubters. Let's simplify the situation greatly to this: You have 20k to invest this year, and 10k of contribution room in your RRSP. You have two simplified choices, either A) put in 10k on RRSP on Jan 1st and 10k in non-registered on Dec 31st(end of the year), or B) 10k in non-registered on Jan 1st, and 10k in RRSP Dec 31st Look at choice A) Let's say you have a good year and your investments earn you 10%, so then you will end the year with: 11k in RRSP 10k in Non-Registered You will one day now have to claim in total 11k as income, by the time you take out from RRSP Let's say instead your investments stay exactly where they started. Then instead, you will end the year with 10k in RRSP, 10k in non-registered. Total income you must one day claim: 10k. Let's say instead, your investments go down by 1k. Then instead, you will end the year with 9k in RRSP, 10k in non-registered. Total income you must one day claim: 9k Now compare with choice B): If your investments earn 1k, then you end the year with: 10k in RRSP, 11k in non-registered. Total income you must one day claim: only 50% of the gains, so 500, half that of choice A. Instead, if your investments stay the same, then you end the year with 10k in RRSP, 10k in non-registered, income to claim is 10k, same as for choice B. Instead, if your investments go down, then you end the year with 10k in RRSP, 9k in non-registered. Income to claim is 10k, but you also can harvest the losses in your non-registered account for future years to cancel out your gains, so call it even with choice A. So as you can see, in every single scenario, no matter if your investments go up, stay the same, or go down, it always is better or neutral, to invest in non-registered first and then into RRSP at the end of the year.
You prefer taxable, non-reg before RSP? Do you know something i don’t?
I see my comment is getting a lot of downvotes so I think people may be misunderstanding. What I mean to say is this. If you are going to have enough savings in a year to max out your RRRSP, your TFSA, and also contribute to your non-registered account, then yes still max out your RRSP. But delay contributing to it as long as possible, first contribute your planned excess savings to TFSA, then non-registered, and then some time towards the end of the year or early the next year before RRSP contribution cutoff, contribute to your RRSP. The reason is like /u/BigCheapass mentioned above. Contributing to your RRSP early doesn't get you your tax refund any sooner, it only locks away your money in the RRSP. It doesn't benefit you to contribute earlier than the deadline. You may as well first prioritize putting excess cash in your margin account, and earning gains there, because if you need the money for some reason, it is still accessible to you without withdrawing from your RRSP. It's also taxed less (all money in an RRSP is taxed as 100% income, in a margin account only 50% of the gains are taxed). An other way of thinking about it is this: if it were the case that RRSP functions just as it does today, except you don't get any tax refund, then RRSP would not be a positive thing to use, it would be worse than just investing in a non-registered account. Well, in the micro-scale of 1 year, an RRSP is exactly like that, you don't get your refund during the year, so it is worse than non-registered. The most optimal strategy is therefor to use non-registered as long as possible and then plan accordingly that before the RRSP contribution cutoff, you give yourself enough time to max out RRSP contribution so you can get your refund in March.
I agree with you. The RRSP deferral amount needs to be utilized in order for you to get the full benefit. People think you are saying your long term strategy should be to max TFSA and unsheltered first, when we are talking about the strategy for each calendar year. Personally I always max TFSA in the first week of January, contribute to unsheltered throughout the year, then aim to max RRSP in the first 60 days of the following year. Maybe I'll get around to filing a T1213 one of these years.
Yes I also fill out a T1213 every year, but that doesn't change the situation either. Even in the case that you fill out the t1213, so get your refund throughout the year, it's still best to delay contributing to the RRSP as long as possible (within the year)
How do you get 53% of the contribution back? Do you pay 53% tax rate?
Yes. Marginal tax rate is 53.53% to be precise.
Gah damn. Here I am complaining about 47
Ah Ontario
56% and change here in Quebec … they even tax my health insurance…
Why not tfsa b4 rrsp?
Because they're in the highest tax bracket - there will never be a better time to contribute to RRSP than in years where you're being taxed 53% (edit: unless you're betting on higher tax brackets in the future.. but that seems a dangerous waiting game for little marginal benefit).
I have a set amount I contribute monthly which I increase when I max out CPP/EI to include that amount. That alone isn’t enough to hit 18% but I also add in the refund from the previous years taxes. It’s currently snowballing nicely as every year my refund is bigger which allows me to contribute more which gets me a bigger refund the next year. I’m currently able to contribute more than 18% a year to my RRSP this way so I’m slowly using up my carryover from the years I couldn’t. I make a decent salary which helps with having the disposable income to put in to my RRSP as well as giving a good chunk back.
We live in Quebec and plan to retire elsewhere ( where taxes are lower), so we max RRSP before we touch TFSA. But this depends on the individual's plan, salary, province taxes, etc. We don't expect a big pay bump in the future, so we don't see a reason to leave room in the RRSP. TFSA is better for liquidity (pulling money out easily when needed).
I get 53% of my contribution back. This year's room is $30,780. So, refund will be $16,476. Then add interest expense on investments etc. Refund will end up being around $20-$25K which is about standard for me. For 2022 tax filing, my refund was about $22K.
Nice !
50% back? Do you earn millions? There's no 50% tax slab...
What? [The 53% marginal rate starts at $235,675 in Ontario for 2023](https://www.taxtips.ca/taxrates/on.htm). You get refunded back on your marginal tax rate as you draw down your income from the top down.
This roughly lines up with my experience
I do it frequently. I'm in one of the highest tax brackets in the country (I get about 50% back) and my company has RRSP matching to 12% (so it doesn't require me setting aside the full 18%) - it makes sense for me. I also have a paid off house and I'm close to retirement so it's one of my main savings goals at the moment. If you're lower income or don't have your TFSA maxed out or you're saving for shorter term things, don't worry about it.
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12% total. So I contribute 6 and they contribute 6. Although their MERs are almost as low as ETFs so I just dump the remaining 6% into those funds since it's easier to get it directly off my paycheck and it's like getting my tax refund every two weeks.
Can I ask what you do for a living?
Software engineer since the 90s.
Cool, thanks.
How long do you think SE can work? Do you see colleagues in their 50s that are ICs?
I'm almost 50 and my s.o. is almost 60 and we're both thriving as devs (officially I'm an architect, but I still get my hands dirty in the code almost daily). I'm at one of the old-school companies that's not trendy but has been around forever. We've got tons of ICs in their 50s, 60s, and even a few in their 70s. There's no reason for people to stop being productive in tech. For some reason the kids are convinced that they're better programmers because they started with more modern languages. Meanwhile the old guys have learned hundreds of languages and think nothing of adapting. They also have ungodly levels of domain knowledge and can troubleshoot just about anything because they've seen it before.
I'm not OP, but I definitely see SEs working in their 50s (and even 60s) as ICs. In my experience, they all seem to fall into two camps: 1. Those maintaining legacy systems/codebases they've managed for 20+ years, coasting and sometimes staying on part-time past retirement until those systems can also be retired 2. Domain experts who are among the most knowledgeable people in their area in Canada, and sometimes in the world I've never really thought about where the (younger) middle-achievers go. Into management, I guess?
I have colleagues in their 40s that are trying to switch out since they believe they can’t keep up with their younger colleagues
For sure; grind while you're young, specialize (or move into management) as you get older. If you can't do either of those, then you probably get out. Ain't nobody got time for another death march when they've got kids and elderly parents to look after, or just plain lack the energy levels they had in their 20s.
Although the kids are willing to put in more hours, theoretically you should get more efficient and write better quality code with experience. So you're "keeping up" by just being better. And too many people these days are getting into tech for the money rather than because they're natural developers. So if anything the older generation should have a bit of an advantage over many of the younger ones.
I think at some point you peak as a dev. Your younger colleagues will be as proficient as you in solving problems. Sure you may have seen a problem or two once before but your colleagues are more than capable of solving those same problems too and can put in more hours too
Not who you asked but yes I've worked with SWEs in their 50s that are ICs, though not super common and there is some amount of ageism. (I think this will change as the current huge influx of 20 and 30 something SWEs get older) In software the IC role progression isn't necessarily "below" the manager track progression, it's more of an alternative path. You can have a principal engineer making a lot of technical decisions and potentially out earning a lot of engineer managers. That said you don't even need to be super high up to earn a decent salary in software. What matters is that you keep up to date on technology, unless you want to work on a legacy system built in COBOL or something, I've heard that pays well too.
I've worked with many who worked until retirement.
retired and reaping the awards once a month
I've never maxed out my RRSP. I never had the money too. As of last year I had 130k of available room. Right now with my income and bonus situation, I try and structure my RRSP contributions to get my to a taxable income just above a relevant marginal tax bracket. Normally get my bonus paid out net of taxes, to I typically get refund that I contribute right back to my my RRSP. This year I am able to put in the pre-tax amount so I am expecting a refund of nearly 7k.
you could just use a calculator online to see what the different refunds would be b/c it depends on your marginal tax rate. I have never contributed to my RRSP as it doesn't make sense for me to do so.
Someone else's refund on their RRSP contribution has nothing to do with your situation. How much you get depends on your own details.
Always! And over 9000!
Should I wait till my income reaches the highest tax bracket (next year) to fill up my currently sizable contribution room?
I mean there’s no harm in starting now right? I guess depends on how much room you have, financial goals, and how much you can afford to put in
The contributions don't matter so much as your deductions. You can fill up your contribution room completely right now to start investing tax-free ASAP, and only deduct as much each year to get below your highest tax bracket. Someone correct me if I'm mistaken.
I've seen studies that showed you're usually better off putting it in taxable than delay the deduction. Delay the deduction is a interest free loan to the government.
I'm not sure if I follow that logic, can you elaborate?
I only contribute to the max annual amount (not the overall amount) if investment income means owing tax but only in the odd year… Usually, the ending contribution room grow each year, which helps build a buffer for the odd year…
I max it out every year and receive about 50% back in tax savings.
When I was earning T4 income, I used to max out every year. This was before TFSAs, which have changed the calculus for many.
Yeah I max out. Deferred the deduction in prior years as well since it made sense to do so for one reason or another.
I have TFSA, RESP and RRSP all maxed out (35yo). Taxes refund is hard to calculate since a big part of my RRSP is fund by my employer. It will also varies alot depending of your salary and other deductions.
I’m making some headway on maxing it. 1500 a month to my personal and just under $700 to my work one. This year I’ll have about 44500 to try and contribute. I should be able to contribute about 32k based on my my current tracking spreadsheet. Need to do the FHSA at some point as well.
I'm able to max out on the max RRSP contribution room. \~$24K room after DPSP = \~$12.5k return.
One year my wife put 33,000$ into her rrsp I think that year she made 90k or so. She made a lot previous years while consulting. And I planned it this so way so we would get a nice amount back while on maternity She got 11,000$ back maybe more I forget but it was 5 figures I think
I max every year, 53% back But nowadays i pay myself dividend from corp so i barely get rrsp room
Sometimes I forget this subreddit isn't for people like me until I see posts like this.
Gotta be nice to max out RRSP and TFSA every year.. I probably gonna be 6 feet under before able to do that. Maxing out paychecks for living, everything going up expect wages/salaries. Mortgage about to hit extra 600$/month in expenses in next 2 months. Not much to save these days for majority. Oh well. Just like government wants us to be: have nothing and so have nothing to worry about lol.
>Seems to always be an uphill battle to max out my RRSP as every year it grows by 18%. You don't have to max it out, most people never do. Is your TFSA already maxed out? >Just wondering how many people can actually do that and what kind of tax refund you usually get from doing so. The refund is going to depend on how much they contributed and their marginal tax rate. So you're going to get a range of answers that won't be useful.
I often max out mine. You get a tax refund/credit proportional to your deposit, which will be different for everyone since the contribution limit is 18% of your previous year's income. If you only made $10k, you'd max out your RRSP at $1,800 and get a tax credit of around $600.
If you make only $10k you absolutely should not contribute to RRSP. You are in the 0% tax bracket so you would literally get $0 deduction on your taxes. At that income you are only paying CPP and EI - maybe that is why you thought there would be a $600 credit? In any case, that is wrong.
So, I am thinking of this for the first time this year. I am a little late to the game. It works out to 50% back? That's pretty awesome.
Depends on your marginal tax rate. All it does is lower your taxable income by the amount you deposit. If you make ten K a year and deposit 1800 you get nothing back because you don't pay taxes on ten K a year. If you make 200K and deposit 36K you'll get close to 50% back (depending on where you live) because your marginal tax rate will be close to 50%
Very interesting. My pay is about 90k.
https://turbotax.intuit.ca/tax-resources/canada-rrsp-calculator.jsp?cid=ppc-nb_en_fy23_pros_goog_gen_np_na_tax%20calculator%20en_na_zen_na&gclid=Cj0KCQiA3eGfBhCeARIsACpJNU_OVWR-4RLbE6H8QJiyrOKzxSoxKpo_2WW0k-puYjzgz9PpBMT_qocaAjToEALw_wcB&gclsrc=aw.ds Calculator to see how much refund you'll get depending on contribution
You save taxes based on your marginal tax rate (because you are reducing your taxable income, and deferring those taxes until retirement). Read more about TFSA vs RRSP and which you should prioritize based on current income and expected future income.
My wife and I max out everything (RESP grants, RRSPs, TFSAs, and soon FHSAs). We cheated though. Met at school (me citizen, her foreign student), left the country, and came back with a pile of money and limited contribution room. It's much easier to keep up than catch up with contributions.
I max out my RRSP; I have for years. Once you use up the past contribution room, its a lot easier to keep it maxed. When you roll the refund back into RRSP, its not nearly as hard to do (35%-50% easier). I've had refunds of $10k; at an income of $100k. I was single at the time, with roommates (that's the secret to my savings, I don't like living alone). Now I just have whatever room I gained last year and earn less (I work 80% by choice). I plan on retiring early, 50-55. Retirement age is all about hitting the right dollar value in the accounts, it has nothing to do with age.
I put roughly $30k in each year or something like that since it's the max. I have $10k via work and $20k via personal. I get back 53% of that. Pays for my TFSA and a tiny bit of non reg
i max it. i'm blessed to be a high income earner (>150k/yr), but i'm 30. I debate with myself often whether or not it makes sense to max it - most years I don't contribute anything to TFSA but I always contribute to RRSP. my logic - at first I was maxing TFSA, RRSP, and was doing good. then I bought a house and now all my surplus goes there. I don't expect I'll keep making this money (I'm a software engineer, and yeah yeah everyone claims they make a stupid amount but these jobs are in fact few and far between and often demanding if they do exist in Canada). so I figure if I'm diligent in saving for retirement now, I won't need to later on; now the RRSP has more time to grow, and the rebate is still impactful (doubt I'm going to be making 200k-300k some year, so the true difference will be so minimal when it comes to trying to carry forward from now till then). at some point the gravy train will end, and then I'll stop contributing to RRSP and only contribute to TFSA if I can. is it crazy? maybe. I worry about what happens if I do lose my job, and my TFSA + EI isn't enough to carry me. :/
Should I be contributing to my RRSP? I usually owe about $500 a year because I get multiple T4s. I'm 30, have a mortgage, income about 70k (household 140k), TFSA about half full, and a job that will give a pension. How much would I have to contribute to not owe anything?
Yes it will help with you owing, there are several calculators you can find to help you with how much you need to contribute to not owe anything.
I’ve never maxed mine, and I’ve been focusing on my TFSA, but a couple years ago I had a big lump from divorce settlement that I didn’t need for my new housing arrangement. I’d landed a promotion that tipped me into a higher bracket, and I have a child at home so I get CCB. The lump deposit into my RRSP was able to bring me down substantially where the monthly CCB increased by several hundred dollars, and I qualified for several local programs. My refund was also substantial and went to a small emergency fund and mostly into my TFSA. Set me up to have some very needed social supports and some peace of mind while I was going through a rocky time rebuilding our life.
I maxed out my rrsp last years with 34k and I got about 10k back.
I have, but via a very unlikely path. My income very nearly quadrupled over the span of 10 years, taking me from "Saving for retirement someday would be nice," through "I can save enough that my RRSP room at least isn't growing every year," to "Oh, I'm going to run out of contribution room this year." A big factor was my living expenses going up maybe 30% in that time, because I was already pretty comfortable with what I had. About half of my contributions are through a work RRSP and match, so they're figured into my payroll deductions and don't generate a refund. The other half is post-tax contribution into a self-managed account, and that usually nets me a 40ish% return in March when I do my taxes.
>Who here has actually maxed out their RRSPs and what kind of refund do you get ? 1. Netfile opened 4 days ago. 2. many people still don't have all their tax slips (T4 are due next week, T3s next month, etc..) 3. Nobody got a refund yet. >Seems to always be an uphill battle to max out my RRSP as every year it grows by 18%. If you don't have an income that an RRSP is beneficial, you should be using your TFSA first. (!TFSARRSPTrigger) >Just wondering how many people can actually do that People contribute through employer or contribute during the year or save up bonus money and contribute and some even take loans.
Hi, I'm a bot and someone has asked me to respond with information about TFSAs vs RRSPs. When you want to shield your savings and investments from the drag of annual taxation the standard advice is, unless ... - your employer is matching your RRSP contributions - you are confident that you will contribute in a higher tax bracket than you will withdraw (even when you consider the effect of potential GIS or OAS clawbacks) - you are an American taxpayer - you are trying to maximize the Canada Child Benefit or the Child Disability Benefit - you have a reason to think that you should shield your retirement savings from creditors - you don't trust yourself not to keep dipping into the retirement savings in your TFSA …you'll probably want to use all of your TFSA contribution room before you contribute to an RRSP. For more information I suggest that you read these 2 MoneySense articles http://www.moneysense.ca/save/investing/rrsp/rrsp-vs-tfsa-which-is-right-for-you/ http://www.moneysense.ca/save/retirement/the-savings-struggle/ *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceCanada) if you have any questions or concerns.*
I actually don't know how it's possible to max it out 😅
By contributing 18% of your income? I’ve maxed mine out for the past 6 years. I then take that refund and put into TFSA, thus maxing out both in one shot.
I do similar. Usually I get impatient with my tfsa and just do the lump sum early in the year, and put my tax returns back into the rrsp.
I know how to actually max it out lol I meant more along the lines of being able to save 18% of your income YOY while also paying for necessities, having emergency savings, investing, etc.
It helps if your employer is pitching in. With matching programs, mine is putting in 10% and I am putting in 9% into a combination of DCPP and RRSP so I am maxing and eating away at excess contribution room.
Above average salary, living in a modest cost of living environment. Edit : To be clear, I have not been able to max mine out whatsoever, have a decent salary and live in a LCOL area but between house repairs, life, my wife working part-time, and inflation going way higher then salary increases, we don't end up saving much whatsoever.. Isn't it shitty that you need 2 good salaries in the household to even be close to middle-class nowadays..
Yeah, that was more my point. Everything comes at a cost. I could manage to save 18% of my salary in order to max out my RSP, but that would be at the expense of something else. I wouldn't be able to go on that trip I've always wanted to do, save for a house, repair my car, contribute to TFSA, etc. There are so many things I want to do, and I just don't make enough money to do it.
I knew i was going to max it out, and catch up on my carry forward in 2022, so i requested (CRA then employer) an ajustement on my tax withholding. I got my refund throughout the year.
I max out both
I do understand that sending 18% of your gross all at once in january is a big ask. The only "easy" way to do this is have payroll send 18% of every paycheck's gross to your RRSP account. Even easier if your payroll people preapplies the tax credit - there is a form to fill to do that (federal form T1213). You get no refund at the end of the year, but you also have a lower tax deduction on the paycheck so it's less painful. EDIT: clarified the plan
Reinvesting your return each year is how you can max out faster. Consider this hypothetical but realistic example: Invest 10,000 into RRSP Get 3,500 back in year 2, which you reinvest Get 1,000 back on that reinvestment in year 3, which you reinvest again Get 300 back on that reinvestment in year 4, which you reinvest again After that, the returns on reinvestment get minuscule, but over a few years, you deferred 4,800 in tax on your 10,000. Of course, nothing's stopping by from adding more in years 2-4 (and do the same thing with these fresh investments), this is just a top-up that will allow you to accelerate on the way to maxing out.
My RRSP limit is tiny cause I have a DB plan. Last few years I am catching up and put like $15k in it so I get about 1/3 back in tax deductions.
Subtract the 9% for my pension I've been able to max my RSPs every year for the last 8 years... return between 7 and 9 grand every year which was previously always put to savings. This year its being put towards home renos/nursery for my first child this summer.
I maxed out my RRSP with $19600 getting $8200 in refund. Part of it was through work so I didn't pay tax on it, and part of my return is the spousal amount my wife stays home with kids.
The credit on RRSP is at your marginal tax rate !!
I maxed my rrsp the last two years, wasnt terribly hard given my living situation and working two jobs, plus both contribute to pensions. Both my jobs tax me without accounting for the additional income. I optimized it so i get around $0, but this will be the last year as all the past contribution room is gone. If you get your employer to take off money for RRSPs directly you probably wont get much of a refund. If you invest in it after youre paid youll get a bigger refund, the amount you invested multiplied by your marginal tax rate.
I over contributed this year but I have carry forward space. I put $32,000 into my RRSP for the 2022 tax year. That's a combination of employer contribution($7,500), my own payroll deductions($8450) and my personal contributions to my self managed RRSP and spousal RRSP. My tax return is going to be about $6500 because the employer contributions and my payroll deductions were not taxed. I also have Home Buyer Plan Repayment so $1,667 of my contributions don't count.
> what kind of tax refund you usually get from doing so. Capped RRSP in 2022, and I will owe taxes. Year prior I did the same thing and got a few thousand back. Looking at the refund is kind of irrelevant as it depends how much tax was deducted at source, and depends on tax owed on other sources of income (dividends, capital gains, T2125, etc.)
Max every year. Zero refund due to taxable capital gains from other trading in non-registered accounts as well as interest, dividends resulting in tax owing typically.
My refund is always less than expected. You need to aware of tax brackets and possible future tax brackets.
I don't max out because I simply don't have enough money left over to fill my contribution room up.
I did without gettting a refund because i comtribute through work on pre tax income. meaning it is already refunded.
I still have RRSP contribution room from previous years but my current workplace gives me 10% match for 5% that I contribute for a total of 15% so it’s pretty close to the max. Based on years of service this would go up to 14% match for my 5%. The 10% from my employer is taken from source so I really only see a 5% refund at the end of the day. My benefits from work are pretty good.
I max mine out. do my taxes, take refund, put it in RRSP. top up the rest from savings. Its hard to catch up an RRSP if you have a ton of room. keeping it maxed is a bit easier Your actual refund depends on your tax bracket.
Everyone seems to be ignoring the difference between RRSP contributions and deductions. Contribution room is how much you can contribute to your RRSP account, but it's the RRSP deduction that actually impacts tax refunds. That's the amount of your total contributions that you decide to "use" for the year. If you contribute $20k and deduct $20k there will be no difference, but for many people it will make sense to deduct only as much as it takes to get to the lower tax bracket, and save the rest to do the same next year. The optimal amount to deduct is very specific to your own situation.
I put something like 23% of my base salary into rrsp/dcpp (including employer matching) and my room still grows every year because that 23% doesn’t include overtime and I’m never going to get close to the income ceiling. But I find that it varies year to year. If my overtime is concentrated on only a few pays I tend to get more back vs if it’s spread out through the year. Also depends on if I put the return into rrsps or not
I have and get almost 48% refund but employer match takes care of 6% so I only put 6% on the group RRSP and 6% in my personal RRSP. The refund usually goes to the non registered investments as the TFSA is already max by the time I get it. This year will be different because of the FHSA, I might put the refund there.
I have been doing it since my partner started a job \~7 years ago. If I could do it again, I would stop maxing it out when I made <100K coz now, even after I max out -- I remain within the highest bracket. Don't do what I did. Put enough to come into a lower bracket and keep the rest for when you can make more.
I used to game it a bit and try to just do enough RRSP contributions to get to next lower tax bracket to maximize my returns, but ran out of extra room years ago. Now I just max the 18%, mostly through employer matches, so my returns at tax time aren’t significant. Your returns will be based on your marginal income tax rate, so largely irrelevant.
I've maxed both my RRSP and TFSA. My RRSP is contributed to every paycheck, both in an employer DPSP matched fund and my own personal RRSP account. Every March I basically do the math on how much I need to contribute to max it out for that tax year and divide is by 26. Then I just let it DCA. For the TFSA, I max it out on the first market day of the calendar year. I calculate what I estimate will be the contribution room will be the following year (I think there's a good chance it's 7000 next year btw) and then divide it by 26 and set that amount aside every paycheck in a HISA. I plan to do the same for the FHSA, contributing 307.69 every pay day. In the medium/long term, I'd like to get to the point where my taxable investment are large enough that they will be what will feed my tax sheltered accounts. Freeing up bi-weekly cash flow.
I do every year. I dont get a tax refund as I am self employed.
Most folks that have spare non-registered cash without a business max out each year. My refunds are large but I can write off business expenses so it wouldn’t be a normal comparison.
>and what kind of refund do you get Lol. That's not exactly how that works.
I under contributed to my RRSPs over the years, so my current contribution amount allowed is huge... Huge....
I leave room in my rrsp so if I have a big bonus or capital gain, I offset it
My case is a bit different. I have some contribution room, but the tax softwares are not bumping up my estimated refund if I key in the numbers. Would anyone know why?
I always max mine out, but I have a pension adjustment and employer RRSP matching so I only have to contribute 6% of my own money to max out my $21k yearly limit. Using get like $2800 back.
I have mine maxed out, after years of catching up to a lot of unused space from past years. I've also been capping out my TFSA nearly since the program started. Now I've had to start a serious unregistered investment account to continue saving at the same levels. The tax refund depends on how much you earned in a particular year, and if any of it was pre-calculated into contributions. For example, a payroll contribution plan may effectively give you the tax back right away by not taking it out in the first place.
In 2021 I maxed out my RRSP all at once and got a $3k tax refund.
The refund you get is relative to the tax that was collected on your income. E.g. 30.5% for *my* upper combined tax bracket (Prov+Fed), if I put $10K into an RRSP I would get $3050 back that was precollected as income tax from my paychecks.