|Big Pile of Locked-in Money|
I do not enjoy giving the government my hard-earned money. Before I even see my paycheque the government has taken their cut which amounts to about $3,000 a month. As if that wasn't enough I pay huge taxes on just about everything I buy from gasoline to groceries. GST, PST, and now HST. Oh, I'm not done yet...there's also all the other little or not-so-little fees throughout the year for things like a fishing license, a new sticker for my car's license plates and so on.
So, I try to find ways to hang on to more of my money hence I've been a faithful contributor to an RSP account for over 20 years. Because my employer takes off a big chunk every month for my teacher's pension I haven't had a ton of contribution room in my RSP each year therefore I don't want to lose a lot more of my money to withholding taxes when it's time to withdraw.
Yeah, here's the kicker. Putting money INTO an RSP really helps out at tax time - I've gotten some juicy refunds over the years. However, I didn't do the smart thing and reinvest that refund - if I had I'd be sitting on a pretty nice cushion of savings right now. No, being a single parent meant I used that refund to catch up on bills, buy my daughter a new pair of ghillies for her highland dancing and pay off credit cards etc.
BUT, using another highland metaphor - EVENTUALLY YOU HAVE TO PAY THE PIPER!! Yes, the government was nice to you when you put your money IN, but when you take it OUT they want more than their fair share. See chart below for taxation rates depending on the amount you withdraw.
|Amount of RRSP Withdrawal||All Provinces Except Quebec||Quebec|
|Up to and including $5,000||10%||21%|
|$5,000.01 to $15,000||20%||26%|
|More than $15,000||30%||31%|
- I want to have the control over my money, not the gov't (yeah, right!)
- I want to have access to my RSP funds in the years before I'm eligible for OAS (Old Age Supplement) and before accessing my CP (Canada Pension Plan). Once I hit 65 I will be receiving CP & OAS as well as my teacher's pension. It will be the years from 58 to 65 that will be the leaner years, income-wise thus making it the ideal time to withdraw funds from my RSP and keep tax rates at their lowest. (Not that 10% is low by any stretch of the imagination!!)
So that's my story and I'm sticking to it! I hope.