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RRSP’s Can Create a HUGE Tax Burden
Posted on April 21, 2008 at 4:32 pm
Filed Under Canadian Taxes, Financial Planning, Retirement Planning
It is commonly accepted that RRSP’s are the single greatest investment vehicle for Canadians saving for their retirement.
A recent article was just written talking about the substantial tax burden that RSP’s can create during your retirement years. In the article, Frank Witington states “Many people approaching retirement have been savers all their life. When they go into retirement, they don’t increase their spending, they just reduce their lifestyle.” The real problem with this situation is that the tax burden on your heirs can be significant considering the majority of your RRSP account, and some times the entire amount, will be taxed at the highest level leaving your recipients with a substantial tax bill.
Your Take-Away: There are a number of strategies that one can take advantage of such as withdrawing larger amounts during your retirement years or even purchasing a life insurance policy to pay the tax bill on your death and thus leave your entire account to your heirs tax free. Additional tax planning can play a big role as you accumulate this asset because there may be other ways for you to actually create a tax deduction similar to your RRSP, and also ensure your investment account is transferred a little more tax effectively to those you care about.
No matter how you cut it, an RRSP can be a tremendous investment vehicle in the immediate future, but don’t forget that with the pro definitely comes a con. Proper planning could potentially save you thousands if not tens of thousands of dollars!
Until next time, have a Magnificent Monday.
Chris & Elisseos
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[…] RRSP’s Can Create a HUGE Tax Burden It is commonly accepted that RRSP’s are the single greatest investment vehicle for Canadians saving for their retirement. A recent article was just written talking about the substantial tax burden that RSP’s can create during your retirement years. In the article, Frank Witington states “Many people approaching retirement have been savers all their life. When they go into retirement, they don’t increase their spending, they just reduce their lifestyle.” The real problem with this situation is […]
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