Quote:
Originally Posted by mr_chin
IMO you should buy enough RRSP to not pay tax. Once you pay tax to the government, the money is gone and can never be retreived again. At least once you have your money in your RRSP, you can withdraw if there ever is an emergency. If not, then let it sit.
To me, RRSP saves us from giving money to the government and it's stupid not to contribute if you owe tax this april.
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Quote:
Originally Posted by mr_chin
Don't get me wrong, I'm not expert in RRSP, just started learning it myself.
But isn't the tax you pay from taking out an RRSP the same as if you are paying it now?
So for example, if you owe $4000 on your income tax. If you buy say $12000 to defer it. Later in that same year, if you take it out, you get taxed $4000 right?]
No sarcasm or anything, just purely trying to learn RRSP myself.
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Please don't be giving out RRSP advice if you have no clue how it works.
First off, even if you do not use up all your RRSP room, whatever is left over is carried over to the following year, so NO, your tax money is not GONE FOREVER.
Say you have $42,000 of taxible income this year.
2012 Income Tax Rates Canada | Tax Brackets 2012 | Canadian Income Tax Calculator | Canada Tax Information
You would be in the lowest tax bracket, 15%.
Sure, you could use up all your eligible RRSP room this year and save 15% on that amount, or save it for a year you make more money.
And on your question about taxing your money if you take out your RRSP's, well that amount that you take out get's added to your income from that year. Say you need to take out the $12K in RRSP's. And you made $60K that year. Well, your taxible income is now $72K. Tax amount taken in tax could be equal to, greater than, or less than what you got back when you first invested the $12K in RRSP's depending on what your tax rate was at the time of the purchase.
RRSP's are meant for long term, and is tax deferral not advoidance.
In a perfect world, when you are 65 and retired, your income should be a lot less than what it is now and that is when you would pull your money out of RRSP's because at the end of the year, your taxible income should be a lot less.
And remember, the more money you have in RRSP's, the less money you get from the government.