When you’re retiring, what’s your best strategy for your RRSP?
There are 3 scenarios:
Scenario 1
You’re going to take the commuted value. So, you want the max amount of RRSP contribution room available when the cash hits your jeans.
For example, your commuted value is $750k including $400k of non sheltered cash. Every dollar you put into an RRSP will save about 50 cents.
So, don’t contribute anymore now. Be greedy. Keep as much room as possible. You’ll save at the highest tax bracket.
Scenario 2
You’re going to take the copycat annuity. You might get some cash surplus. I’ve delivered up to $78k of cash surplus. {The insurance companies are hungry for copycats.} Again, you want as much RRSP contribution room as possible when that cash surplus hits. But, if your cash surplus is less than your income in your last work year, you may want to fill that RRSP now. Confused. Well, fasten your seat belt, it gets worse.
Scenario 3
Generally, you don’t want to take unused RRSP contribution room into retirement. Why? It will do you no good when you have low income.
Remember, RRSPs work best when you contribute while earning a lot then withdrawing when earning little. It’s all about tax planning.
You say that some of these items are contradictory. You’re right. They are. You need a financial planner.
