An Easy Trick to Boost Your RRSP Refund!

[@uprosper8851]

Hi Kent, The formula is just (Current Tax Refund)/(1- Marginal Tax Rate). Example: if your current tax Refund is $5,000 and your marginal tax rate is 40%. Then 5,000/(1-0.4)=8,333. Hope that helps!

[@K4Financial]

Perfect, thanks

[@Krueger444]

I was super skeptical of this answer cause it felt too simple. Spun up a spreadsheet and did the iteration - it worked out to be exactly the same.

[@K4Financial]

@@Krueger444 I thought so too, but that’s because I was always coming at it from the initial contribution, so I guess there is more to the equation because you have to get the refund amount first.

[@sunfun2010]

Here is what worked for us, purchase as much in your RRSP as you can afford each year, without skipping a beat take the refund and put it on your mortgage. Started doing this in our 20s and we were mortgage free at 40 and 7 figures in our RSP fund at 60 year, and retired. Its amazing how much money you can save when your house is paid for. SIMPLE YET EFFECTIVE!

[@jeromeleoterry]

I use this strategy every year, borrowing form my HELOC. I use the wealth simple tax calculator. Enter your income, RRSP contribution, and taxes paid, and it shows you the estimate refund, average tax rate, and marginal tax rate. Then by adding more to RRSP contribution, I can eyeball average and marginal tax rates. The formulas are too complicated to be useful for every level of income / RRSP contribution, so I just use software to do it.

[@DcArmy9015]

You also have to account for Pensions as Feds for example have the Pension adjustment so we get less than the average person who invests the same, Soni have been shown.

[@dinamat5963]

Thanks Kent, its a good strategy, Also if you can explain the " reduction at source" to the viewers. That worked for me in the past. Thanks

[@bradgraystock5966]

My formula is $10,000 RRSP + $3600 RRSP = $4896 Refund - $4896 Fishing Boat = $3600 Unpaid Loan (Winning)

[@terryevp4084]

Awesome video, Kent. Many Thanks

[@alreade8477]

Question: Is it always worth it to make an RRSP contribution to reduce d Tax burden now even if your retirement tax bracket won't change much? I will owe in April about 5k in taxes. I already put 17k in my RRSP and still have some room. Should I put as much as possible?

[@Mechone11]

i would, i look at it like i would rather pay myself than the government

[@sandray7609]

The challenge is getting it out. If you think you'll make less in retirement, it's definitely worth it. If you think your income in retirement will be high, then you might want to reconsider or think about doing an rrsp meltdown. Depending on your income you should also try to take advantage of the tfsa

[@Mechone11]

I'm 61 will 62 this year and will retire in early 25 ,doing an rrsp meltdown,a LIRA into lif taking 50 % of it and transferring it into rrsp .D eferring CCP ,starting define benefit pension and oas at 65

[@DL-bl6qp]

If you have a spouse, you can income split RIF income at 65, I believe. (Check the number) That may be one benefit of having RRSP's even though your tax bracket may be similar. Another thing you could do to reduce your retirement income (again, if you have a spouse) is buy a spousal RRSP: You will get the tax refund, but the spouse will own the RRSP and need to claim the retirement income. This might be beneficial to do if you are going to retire earlier than the age where you are allowed to income split to keep your income lower.

[@sandray7609]

​@DL-bl6qp there's a trick with spousal rrsp, you have to wait 3 years after contributing or else the money taken out is attributed to the contributor. So no income splitting if you take it too soon

[@alreade8477]

I'm not sure I understand your Ask?