Sorry, folks, there's no free money with RRSPs despite what you've been told — via financialpost RRSP PersonalFinance
For example, consider two 50-per-cent taxpayers. Taxpayer A makes a $10,000 TFSA investment, while taxpayer B makes a $20,000 RRSP investment. The extra $10,000 is required to keep pace with the TFSA, otherwise the RRSP will fall way behind. This extra is also required to prefund the future tax liability.
The RRSP looks like $20,000 but it is only $10,000 of B’s investment plus a $10,000 deposit on account of future taxes. It is also only worth $10,000 to B as that would be their net proceeds on withdrawal after the CRA gets its share. Any investment is only worth what it can be liquidated for after tax.Article content
Also note that B saved $10,000 of current tax, but had to deposit it in advance to fund the prepaid future tax. Current tax saved into one pocket; future tax prefunded out of another pocket. No tax saved. No tax deferred. No free money wealth accretion.A now has a $20,000 TFSA, which they cash out and get $20,000 in pocket tax free.
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