Quote:
Originally Posted by kobe tai
Ok - I got a question for you... Let's say you inherit that amount and have no room in your TFSA, have room in your RRSP but also collect a pension (survivor's pension). If I max out my RRSP then I may not be able to collect old age security/CPP in the future correct? Would it make more sense to do a registered account at this time? If my income is not too large currently? Or should I just max out the RRSP and forget about collecting anything from the government later?
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Honestly, that's a specific enough question that it is worth talking to a professional who has all the facts in front of them to give you a personalized answer. I'm not totally clear if you are still working, or retired, and whether you collect the survivor's pension now.
I think you are working and collecting a survivor's pension now - if that's the case, your income level and therefore your tax rate, is probably relatively high. The way we generally look at RRSP contributions is less on whether you'll have OAS clawed back and more on what the difference in your marginal tax rate between today and when you are retired and having to draw out of your RRSP to fund lifestyle.
You only have to convert your RRSP to a RIF at age 71 and then from there you are only required to withdraw 5% per year. What that means is that unless you have created a very large RRSP, the chances of having all your OAS clawed back are quite low since I believe you need about $120k/year during retirement to have that clawed back fully.
Generally the tax benefits of using the RRSP efficiently and to its maximum are more than the value of the OAS you might give up in the worst case scenario. But I will reiterate, I think you should talk to a professional who has all the information for your specific needs as it sounds like there is some complexity that you might be able to take advantage of to improve your overall picture.
-Mark