RRSP Season Again: The $1 Trillion Opportunity

Over $1 trillion: At last count, that’s how much that was reported by Statistics Canada as the total amount of unused Registered Retirement Savings Plan (RRSP) contribution room of Canadian taxpayers.1 While unused contribution room may be carried forward indefinitely — and there may be good reasons to do so — there is a forgone opportunity of tax-deferred, compounded growth.

RRSP contributions appear to be declining over recent years, perhaps due to certain perceptions. One belief is that it is better to invest funds in a Tax-Free Savings Account (TFSA) because TFSA funds are not taxed at withdrawal. However, consider that the RRSP may be a better choice than a TFSA if you expect to have a lower marginal tax rate in retirement (see chart). This may apply to individuals who experience peak earning years while working but will have a lower income in later in life.

Don’t forgo the tax advantages offered by an RRSP. Does any of that $1 trillion belong to you?

RRSP vs. TFSA table

Reminder: Deadline for RRSP contributions for the 2019 tax year is Monday March 2, 2020.

1 https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1110004501