RRSP’s – What are they & Are they good or bad? Part 4

So let’s now breakdown some of the Goods and Bads of RRSPs, starting with the Goods:

Good facts about RRSPs:

1.    Tax Deduction in the year you contribute

2.    Long Term Growth of Investments

3.    Deferred tax on Growth of Investments

4.    Forced Savings program

Bad facts about RRSPs:

1.    You are eventually taxed

2.    There is a limit on how much you can contribute (may be a good)

3.    Unlike other investment vehicles, you cannot use RRSPs as collateral

4.    You are restricted as to what you can invest in

5.    There are age and income restrictions to RRSPs

6.    Government is in control of the rules

7.    RRSPs are in trust for the government

8.    You cannot receive the tax favorable benefits of Capital Gains and Dividend Income inside of an RRSP

9.    You cannot deduct investment losses on your taxes

10. You cannot deduct interest and carrying charges if you borrow money to invest in an RRSP

This gives you an idea of some of the main Goods and Bads of using RRSPs.  Your bottom line is that you need to plan thoroughly to decide if using RRSPs is for you or not!  Again remember the key if you are using RRSPs is to contribute when your income is high and withdraw when your income is low.

If you are contributing to RRSPs definitely consider using a self directed RRSP as there are many advantages.  Also if you are considering withdrawing from your RRSP, do it in increments of $5,000 or less as the withholding tax is lower.  The key in withdrawing an RRSP is to have a tax plan.  Kustom Design can help you plan a tax effective RRSP withdrawl if this is what you are looking at doing.
There are many more strategies available with and without RRSPs so do come plan with Kustom Design to ensure you maximize your potential and minimize your tax.  Some of the other things you can look at is using your RRSP to give yourself a “Self Directed Mortgage”, where your RRSP holds your mortgage!  Other strategies could be tax shelters and flow through shares.  Come take our Financial Boot Camp to learn more about all of these topics and more.  You can sign up for the Financial Boot Camp on our website at www.kustomdesign.ca/.