{"id":1935,"date":"2026-01-26T08:00:17","date_gmt":"2026-01-26T08:00:17","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/?p=1935"},"modified":"2025-12-29T21:44:05","modified_gmt":"2025-12-29T21:44:05","slug":"rrsp-season-is-here-again","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/2026\/01\/26\/rrsp-season-is-here-again\/","title":{"rendered":"RRSP SEASON IS HERE AGAIN"},"content":{"rendered":"\t\t
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The RRSP: Why Are We Falling Short? Debunking Two Myths<\/h2>

While many of us are unhappy about the high taxes we pay, one way to ease the burden is by fully using tax-advantaged accounts. Yet RRSP participation rates have declined over the past two decades, from 29.1 percent of taxpayers in 2000 to just 21.7 percent in 2022. The good news: high-income earners are more likely to contribute: 66 percent of taxpayers earning between $200,000 and $500,000 contributed in 2023. But younger Canadians are falling short. The introduction of the Tax-Free Savings Account (TFSA) in 2009 may be part of the reason, but persistent misconceptions about the RRSP also play a role. Let\u2019s address two common myths:<\/p>

Myth 1: It\u2019s better to invest in a TFSA than an RRSP.<\/strong> In fact, the RRSP generally yields a greater benefit if you expect a lower tax rate in retirement. In practice, many contribute to their RRSP during higher-income working years and withdraw when income is lower in retirement, leading to an advantage for the RRSP. Of course, there may be situations when the TFSA is a better choice, such as if you have a higher tax rate at withdrawal or face recovery tax for income-tested benefits like Old Age Security.<\/p>

Myth 2: RRSPs aren\u2019t worth it because withdrawals are fully <\/strong>taxed, whereas in non-registered accounts, only income and <\/strong>gains are taxed<\/strong>. A common complaint is that RRSP withdrawals are fully taxed at marginal rates, whereas non-registered accounts only tax income and gains (with favourable tax treatment for dividends and capital gains). While it\u2019s true that RRSP withdrawals (usually from a Registered Retirement Income Fund (RRIF)) are taxed as income, what\u2019s often forgotten is the initial tax deduction at contribution. Remember: a $30,000 RRSP contribution is equivalent to an after-tax contribution of $18,000 at a marginal tax rate of 40 percent. If your tax rate is the same at the time of contribution and withdrawal, you effectively receive a tax-free rate of return on your net after-tax RRSP contribution (chart). In many cases, even if your tax rate is higher at the time of withdrawal, you may be better off compared to a non-registered account due to the effect of tax-free compounding over long time periods.<\/p>

\"\"<\/p>

While the fair market value of the RRSP\/RRIF at death is generally included in the terminal tax return and taxed at marginal rates, there may be ways to mitigate the potential tax liability. This includes a tax-deferred rollover to a spouse or financially dependent (grand) child. Another way to manage the potential tax bill is to engage in a \u201cmeltdown strategy,\u201d making withdrawals earlier when your tax rate is lower than you expect in the future or at the year of death.<\/p>

2026 Reminders for Tax-Advantaged Accounts<\/strong>
RRSP Deadline<\/strong> \u2014 The deadline for RRSP contributions for the 2025 tax year is Monday, March 2, 2026, limited to 18 percent of the previous year\u2019s earned income, to $32,490 (for 2025).*
2026 TFSA Dollar Limit:<\/strong> $7,000, making the eligible lifetime contribution room $109,000. *Plus any previous years\u2019 unused contribution room carried forward, less any pension adjustments.<\/p>

\"\"<\/a><\/p>

The information contained herein has been provided for information purposes only. The information has been drawn from sources believed to be reliable. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual\u2019s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Private Wealth Inc. (WAPW) does not guarantee the accuracy or completeness of the information contained herein, nor does WAPW assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact your financial advisor. Transactions of the type described herein may involve a high degree of risk, and the value of such instruments may be highly volatile. Such risks may include without limitation risk of adverse or unanticipated market developments, risk of issuer default and risk of illiquidity. In certain transactions prospective investors may lose their entire investment or incur an unlimited loss. This brief statement does not disclose all the risks and other significant aspects in connection with transactions of the type described herein, and prospective investors should ensure that they fully understand the terms of the transaction, including the relevant risk factors and any legal, tax, regulatory and accounting considerations applicable to them, prior to transacting. The information contained herein may include the opinions of representatives of third-party companies or organizations and may not necessarily reflect that of Wellington-Altus (WA) or its representatives. All third-party products and services referred to or advertised are sold by the company or organization named. While WA may have referral arrangements with some third-party companies or organizations, WA does not specifically endorse any of these products or services and is not liable for any claims, losses or damages however arising out of any purchase or use of third-party products or services. All insurance products and services are offered by life licensed advisors of Wellington-Altus Insurance Inc. or other insurance companies separate from WAPW.<\/span><\/p>

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There are many reasons to consider a Registered Education Savings Plan (RESP) to save for a child\u2019s future education: tax-deferred growth within the plan, earnings taxed at the child\u2019s tax rate when eventually withdrawn and, of course, the Canada Education Savings Grant (CESG).<\/p>\n","protected":false},"author":68,"featured_media":1336,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[27],"tags":[258,267,260,67,259,144,79],"class_list":["post-1935","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles","tag-capital-gains","tag-financial-advice","tag-financial-freedom","tag-financial-planning","tag-wealth-advisory","tag-wealth-management","tag-wealth-planning"],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/posts\/1935","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/users\/68"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/comments?post=1935"}],"version-history":[{"count":4,"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/posts\/1935\/revisions"}],"predecessor-version":[{"id":1939,"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/posts\/1935\/revisions\/1939"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/media\/1336"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/media?parent=1935"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/categories?post=1935"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/smokinbulls\/wp-json\/wp\/v2\/tags?post=1935"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}