Keeping the RRSP season simple with tips from Envision Financial expert, Shalane Wellard

Keeping the RRSP season simple with tips from Envision Financial expert, Shalane Wellard

As we come up to investment season, many look to RRSPs as a simple retirement savings strategy, but deciding if and when to contribute to an RRSP isn’t always as simple as you might think.

eAccording to Shalane Wellard, financial advisor at the Cloverdale branch of Envision Financial, a division of First West Credit Union, RRSPs may not be the best option for every situation. What’s best for you depends on your financial situation and your current and future tax rates.

RRSPs are best used as a tax sheltering and tax deferral tool, so making contributions during your low income years means a smaller tax break. When you’re making less than $41,600 in taxable income, for example, your tax rate will be about 24 per cent—meaning you’ll get 20 per cent of your RRSP contributions back after filing your taxes. If you’re earning $70,000, you’ll receive about 33 per cent.

This is a good example of why it may be beneficial to put your money into a TFSA when you’re earning less where you can still access the money without being taxed on any earnings. As you begin earning more, then start thinking about RRSPs as an effective tax deferral strategy.

Whatever you choose, take time to develop a financial plan with an investment professional—a free service with many financial institutions, including Envision Financial—so you can get an overall picture of your finances and make informed decisions that will help you and your savings thrive.