Trusted Tips and Resources

Trusted Tips & Resources

Trusted Regina Financial Advisors share information about RRSP season.

Welcome to RRSP Season!

It is that time of year again when attention turns to RRSPs and tax planning. 

The purpose for making an RRSP contribution, from a financial planning perspective, is to build savings and assets over time so that you can replace earned employment income with passive or investment income for your retirement years. In other words, you can sleep in and still have the lifestyle you want without going to work!

The Canadian Government assists you with that objective. It does this by giving you a tax deduction for contributions so that you can save more money on a pre-tax basis than you would if the money was taxed and then saved. Secondly, it allows for the tax-free growth (tax deferral) on your RRSP so that the capital amount will be much greater than it would be if you were taxed annually on the growth or income.

Most people focus on the tax deduction only while ignoring the significant benefits of the compounding effects and growth on the money that is not paid out as taxes. The theory is that you are contributing money while in a higher income tax bracket during your working years and withdrawing it in your retirement years while you are in a lower tax bracket. The reality is higher income earners may find themselves in the same tax bracket in retirement!

This leads many people, including some accountants, to challenge the effectiveness of RRSP by saying: Why bother with an RRSP if you have to pay taxes on the withdrawal!? This viewpoint ignores the real power of tax-deferred compounded growth and the effects of compound growth that you can achieve in an RRSP, especially on the capital that would have otherwise been lost to income taxes.

The math works something like this. If you took the assumed future capital value of your RRSP at age 65 or 70 and then collapsed the RRSP (not recommended) and paid 50% of the capital as income taxes, the remaining capital would still be higher than if you had been building your savings outside the RRSP in a fully taxable environment.

Impossible you say! Take a calculator while watching TV and invest, say $10,000 a year, minus your annual income taxes, say 30%, then invest the balance of $7,000 at an assumed rate of growth, pick 5% to keep it simple, then subtract the taxes on the earned income $105. The net amount at the end of Year One is $7,245. Then do this another 39 times assuming the person is age 25.

Year One Effects of RRSP Investing

Compare this with the RRSP with $10,500 at the end of Year One. The gap only gets bigger over time!

Long Term RRSP Accumulation

There are situations where RRSP contributions may not be the right thing for some people some of the time. For example, young people at the start of their careers or low-income earners nearing retirement. A TFSA may be the better solution!

These are just two alternatives for building savings and assets something which you would still need to do even if RRSPs didn't exist. RRSPs just make it easier to build savings. Call us today to discuss more savings and tax planning strategies!

Trusted Regina is excited to welcome Logic Renovations to the Trusted Regina Directory

Trusted Regina is very excited to announce a very exciting new edition to the directory under the Renovations category!

Logic Renovations is now a Trusted Regina renovation company and we couldn't be more pleased! When speaking with Vern ( the owner of Logic Renovations ) I came to find that he truly does care about the quality of work that he does.  Vern is no fly-by-night contractor he has been doing this for over 10 years and has continued to build a relationship with his customers.  I spoke with many people who have used Logic renovations during our vetting process and some comments that repeatedly came up were.  "He did what he said he was going to do" "He explained everything clearly", "he was respectful of our home and kept it clean" and most importantly "he did and great job" and "we would use him again".  

Of the many comments that I heard was that Vern had let go a sub-trade part way through a job because he wasn't happy with the level of work being done.  He found a reliable replacement and still managed to get the job done on time and on a budget without sacrificing the quality of the work. These are only some of the amazing reasons why Logic Renovations definitely live up to what we at Trusted look for in a Trustworthy business.

"Vern's work was awesome! I had been using other contractors for renovation work in the house and Vern fixed some of the work they had done.  I left him a key to the house and he was so clean we barely even knew he was there.  I would not hesitate to use him again and recommend him to anyone" John Tsechelidis Regina
"Vern was very nice to deal with he was polite, kind, explained everything and did a great job.  The quality and service was better than promised.  He was on time every day and we plan on using him in the future.  We have worked with other contractors over the years and finally found one we like and trust" Pam - Regina
"Vern isn't the cheapest but well worth it.  He shines with integrity and the work that he does is very professional.  He did what he said he was going to do and had innovative ideas and options to ensure we got what we wanted." Donavan Muchler- Regina

Logic Renovations Specializes in:

  • Basement development
  • Restorations
  • Bathroom remodeling
  • Exterior work fences and decks
  • Kitchens
  • General renovations
Check out before and after examples of his work.

Logic renovations are a TRUSTED REGINA Renovation Expert.

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S & E Trusted Online Directories Inc
310 Wall St #209
Saskatoon, SK   S7K 1N7
Ph: 306.244.4150


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