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RSP Disadvantage

[ckwong]

When you are young, your tax bracket is about 10-15%. If you do well, when you retire, the tax bracket could be 25-30%. The withdrawal from RSP is 100% taxable at your highest tax bracket. So you delayed the tax but pay more. On top of that you would not enjoy the dividend tax credit which will only be losing its advantage when you have some very decent income. If you have capital gain, you pay maximum of 25% tax but you pay your top tax bracket for your RSP withdrawal.

For dividend investor or capital gain investor, it is better off to stay away from RSP.

TFSA limit is about $6,000 each year which is higher than many's RSP limit. There is no tax advantage for the contribution however at the end you have tax free income when you pay the tax up front.

RSP is designed by the government to grab more tax.

[TickerTwit]

There is also an estate liability. Your RRSP (or RRIF) will be taxed at your marginal rate in the year you die, but if you instead went to a non-registered account it's only subject to 2% probate (Ontario). It is also possible, from within a non-registered account and taking advantage of the dividend tax credits, that you will pay little or no tax on the (hopefully increasing, if you invested

[babedinkleman]

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[felix10]

People criticizing RSP's really don't seem to understand how they work. You don't really lose the benefit of dividend tax credits or capital gains. Depending on your income, the dividend tax credit in a non-registered account doesn't elminiate taxes, they just reduce it whereas inside the RSP, dividends are 100% tax free for as long as they're in the RSP. Same thing with

[babedinkleman]

This post has been removed in accordance with Community Policy

[TickerTwit]

Set up a spreadsheet and track the consequences of your tax decisions in full detail until the day after you die. Nothing is tax-free or tax-reduced in an RRSP; once money is in there it's merely tax-deferred and you can NEVER change that. But a number of things are tax-free or tax-reduced in a non-registered account. I started my RRSP in the 1980's. I was self-employed and expected my