When I retire 35 years from now, should I let the government take half my money in taxes via RRSP’s or should I invest in mutual funds only and then get all of what I put in. I am a newbie at investing, so I need some explanation on this stuff. So far, I understand that an RRSP is a vehicle to put your money (mutual funds) into while it grows…and the gov’t can’t tax it until you withdraw it. But when you do withdraw it, they take a considerable amount in taxes. So why do people do it? Why couldn’t I invest in mutual funds only, and then in retirement use all of it and just pay capital gains tax.
What’s Better: Mutual Funds or RRSP’s???
Thanks,
J
acheung6 3:57 pm on January 31, 2010
RRSP is a tool to defer income to the future period. When you purchase RRSP, you can deduct it against income in the same year. Income earned in your RRSP are tax free until you withdraw it. It will be taxed in the year you withdrawal the fund (doesn’t matter whether you are over/under 65). You can open an RRSP account and invest in Mutual Funds, Bonds, Term Deposit, and Stock Market.
Depends on the amount of RRSP you withdraw in the year, the government will tax according to the margin tax rate based on the total income of that year.
CharlieC 3:57 pm on January 31, 2010
No. RRSPs exempt you from taxes, unless you withdraw before you’re 65, then you have to pay a lot. RRSP is a tax-shelter program that invests in mutual funds, which you can choose just as well, except that with this you don’t pay taxes if you wait until 65. Happy saving!
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