what is the return % for rrsps

[03c0upe]

Is there a fixed return % for how much you get back if you put money in your rrsp's my accountant was telling me if i put in 1 k ill get a certain amount back. Also does this depend on your income?

[waddy41]

Yes there is a fixed income..
it's called a GIC

[Blinky]

I suggest you do some more reading on what a RRSP is and isn't.

Your question could be interpreted two ways:

1) effect on tax return
2) investment return percentage

1) will depend on the size of the contribution and your current tax bracket. 2) will depend on what sort of investment you put your money into. A RRSP isn't an investment itself - it's a shell by which you can throw in all sorts of investments such as cash, bonds, equities and mutual funds. Your rate of return will depend on how your securities perform.

[taylor192]

Originally Posted by 03c0upe

Is there a fixed return % for how much you get back if you put money in your rrsp's my accountant was telling me if i put in 1 k ill get a certain amount back. Also does this depend on your income?

I posted the exact tax percentages for income levels in BC in this forum, search for it.

Otherwise use taxtips.ca. That site has a bunch of calculators, punch in your income and RRSP contribution and it will give you a very good idea of what you're getting back and as a percentage of your income.

[johny]

yes it depends on your income. the % you get back is the % tax bracket you are in.

[2kreative]

First of all if you make less than 35,000 a year you should not be contributing to an RSP. You should consider contributing to a TFSA. In the long run you will be better off. RSP accounts are face with negative taxation at withdrawal. The products such as stocks and mutual funds invested inside the account are considered capital gains and 50% taxable. When you withdraw these products from an RSP account they are considred income and 100% taxable. The tax refund you receive from a RSP contribution is dependent on your income level. If you are in the lowest tax bracket there is no future spread to gain from deposit to withdrawal. People earning more than $120,000 will receive a 43% tax refund and then at retirement if they withdraw at the lowest bracket will pay 20% in taxes. That provides them with a 23% spread in addition to tax deferrment of investment growth.

I am a licensed financial planner and this is a professional opinion.

[taylor192]

Originally Posted by 2kreative

First of all if you make less than 35,000 a year you should not be contributing to an RSP. You should consider contributing to a TFSA. In the long run you will be better off. RSP accounts are face with negative taxation at withdrawal. The products such as stocks and mutual funds invested inside the account are considered capital gains and 50% taxable. When you withdraw these products from an RSP account they are considred income and 100% taxable. The tax refund you receive from a RSP contribution is dependent on your income level. If you are in the lowest tax bracket there is no future spread to gain from deposit to withdrawal. People earning more than $120,000 will receive a 43% tax refund and then at retirement if they withdraw at the lowest bracket will pay 20% in taxes. That provides them with a 23% spread in addition to tax deferrment of investment growth.

I am a licensed financial planner and this is a professional opinion.

I am an amateur financial planner and this is my personal opinion.

Making blanket statements like above serve the OP no useful purpose.

You are correct that if you are in the lowest income bracket there is little chance the future spread is enough to benefit from RRSPs directly - yet what about the future value of the tax return? Even in the lowest income bracket RRSP contributions would return ~20% which could be put into a TFSA and grow tax free.

Then there are ways to remove money from your RRSP tax free (meltdown), yet as a professional you'd know this and advise your clients who are willing to take this risk about this plan. Right?

[unit]

RRSP accounts are just investment accounts.
it doesnt make money on its own.. you have to invest it.
safest route is GIC if something in the neighborhood of 3% excites you.

[2kreative]

If you are referring to a RIF meltdown. You should first consider if this individual is a leverage candidate? if he/she is in the lowest tax bracket that should tell you they are not. one of the keys to leverage is to reduce interest rate risk and by being in the highest tax bracket that makes an individual more suited for leverage. Perhaps your should review the section on leverage to better understand suitability before suggesting that as a strategy.

Here is a great calculator, it even takes into account your idea of the future value of the tax return by discounting the TFSA contribution after taxes.

http://www.retirementadvisor.ca/reta...SubMenu=preRet

Finally your condescending know it all tone just makes you sound snide and cocky.

[taylor192]

Originally Posted by 2kreative

If you are referring to a RIF meltdown. You should first consider if this individual is a leverage candidate? if he/she is in the lowest tax bracket that should tell you they are not. one of the keys to leverage is to reduce interest rate risk and by being in the highest tax bracket that makes an individual more suited for leverage. Perhaps your should review the section on leverage to better understand suitability before suggesting that as a strategy.

More suitable, yes, yet not unsuitable. The meltdown occurs during retirement - if you're still in the higher tax brackets you have not wisely planned your retirement to avoid taxation and are going to be hit on RRSP withdrawals anyways.

Originally Posted by 2kreative

Here is a great calculator, it even takes into account your idea of the future value of the tax return by discounting the TFSA contribution after taxes.

http://www.retirementadvisor.ca/reta...SubMenu=preRet

Finally your condescending know it all tone just makes you sound snide and cocky.

For someone making $25-35K and contributing 10% of their salary, there is no difference between the RRSP and TFSA - after tax at the default rates. Raise the ROI to 7% and the RRSP wins, yet then you have to start planning when to stop contributing and switch over to a TFSA to avoid clawbacks of other benefits.

Yet if you can structure your RRSP withdrawals to be tax advantageous, there is potential for the RRSP to come out far ahead.

My attitude may be snide and cocky, cause I don't need to give blanket advice and then attach "I am a financial planner" to it to gain credibility. I let my advice speak for itself - you'd do well to do the same.

[waddy41]

financial planning license don't mean shit to me
institutions like freedom 55 and world financial are pushing "financial planners" boiler room style.

btw 2kreative, where do you work?

[2kreative]

I work at JT Marlin

[waddy41]

LOL
boiler room is one of my FAVOURITE movies

[waddy41]

also obviously if you actually have a degree (hopefully related to finance) and you know your shit, then i won't give you grief
but I see freedom 55, world financial, etc. pushing any random dumbass to be "hired" and rushed through training just so they can push their crap onto others..
the reps I've talked to have no idea what's going on...one of them don't even know the initials or the name of the license they're going to get...WTF
I'd punch them in the face if they ever try to sell my family/friends one of their "products'

[taylor192]

Originally Posted by waddy41

I'd punch them in the face if they ever try to sell my family/friends one of their "products'

LOL I share your frustration, and is why I sarcastically made fun of 2kreative for dropping "credentials".

When I only had $20-30K of investments I used to deal with a personal banker at Scotiabank, and every 6 months I'd have to see a new one. Once I hit $50K I inquired why I was always seeing a different banking officer. Turns out I banked at a "training" branch with a lot of turnover for newer banking officers. I told them if they couldn't provide me with a banking officer that had been around a few years and will be there a few years, then I'm switching branches and banks at the same time. The woman who took over my account was awesome and knowledgeable.

Any college/university dud (cause lets face it, anyone with good grades/performance doesn't become a financial planner) can write the certificate courses to become a financial planner - I'd much rather their advice lend themselves credibility than their credentials.

[waddy41]

The people I'm talking about aren't even college grads/diploma grads..

One guy (40 yr old) took some accounting courses and passed his license exams
One guy (22 yr old) is only a high school grad and probably can't pass math 12 right now
He told everyone, "I got hired as a financial planner"