March 2022 Poll: Thumbs Up for RRSPs

Knowledge Bureau Report asked its national audience “Do you believe the RRSP is still a good investment for pre-retirees who work after age 60?” last month and the results were surprising, given all the rhetoric around the use of RRSPs. A full majority – 74% said yes, but with lots of qualifications.  Here’s why:

“There is no “yes or no” option to this question. The answer is it is a planning decision that can only be determined if there is a discussion around the age one will work to, if there is a spouse, is there a difference in income, when will they retire. When are all sources of income, health care needs, does deferral have value, what are the estate goals?  These are just some of the things that need to be addressed.”  - Robert (Bob) White

“RRSP’s are still a great way to reduce taxes, however, it really depends on the taxpayer.  The TFSA is a good option as well to provide tax free retirement income.  A good balance between them is to make sure enough RRSP contributions are made to reduce or eliminate balances due as well as maxing out the TFSA.” - Marilyn Sims

“I don’t think we can approve or disapprove of RRSPs as a whole - It depends on how it’s used. As usual, it depends on taxable income they are applying the RRSP contribution against, what their retirement income tax bracket is when it is withdrawn from the RRSP/RRIF, and if the taxable RRIF withdrawal is being pension split with a spouse in a lower tax bracket.” - Dan Allen

“RRSP after using up TFSA room or to get out of 3rd federal bracket and especially to avert clawbacks.”   - Virginia Hoover

“The RRSP is still a great vehicle for those under age 71.  There is still the advantage of a refund that can be used to add to the portfolio, or to their TFSA. Of course, it depends on what type of portfolio they are currently in.” - Cecily Gittens

“The RRSP used to be a good tool, but the rates of return now are so pitiful that it hardly seems worth it, plus the lower income person (aren’t we all, these days?) doesn’t get much benefit from the deduction. Of course, there are still those financial geniuses who are ‘getting a steady 15% return and that’s O.K. for now’ I believe they are lying. in these dark days, the TFSA is probably better.” - Mitzi-Lynne Morgan

“Depends on the overall strategy behind using the RRSP.  I am not a fan of RRSP’s, but they can be a useful tool." -Earl G.

“Regardless of age, to working seniors under 71, the RRSP is a strong tool to assist in lowering taxable income if one still has contribution room. The obvious strategy is then to apply the tax refund into the RRSP as well, or to invest with it into a TFSA. Either way, keeps your money working for you not the government.” - Ron Young

“Factors to consider:  tax bracket while working; tax bracket in retirement; size of RRSPs; size of TFSAs; size of non-registered investments; longevity expectations; other sources of income in retirement (pensions, annuities, royalties, etc); spousal situation; business ownership; risk tolerance; investment objectives; and income expectations in retirement.  There is no simple yes/no answer. I agree with the notion- it depends!” - Rob N

“As already stated, it depends; however, most of my clients have lower incomes and while contributing to an RRSP may provide short term deferral, it could actually be detrimental in their retirement years. TFSAs and investing are what I prefer to discuss with clients.” - Michael Connors

“The answer, as always, is it depends.  One needs to assess the individual client situation before making a recommendation either way.  I’m not a big fan of RRSPs, but they have their place, and we can structure the investments both now and within a RRIF to hold some longer term investments, particularly with increasing longevity, so it’s beneficial to have some growth components in retirement savings.” - Derek T

“For the no side: The RRSP makes no sense for a 60+ business owner, since one would be much better off in a registered pension plan like a Personal Pension Plan, especially if the owner has children on the payroll (inter-generational wealth transfer without tax on death).” - Jean Pierre Laporte

“I don’t advise anyone over age 57 to invest in RRSP’s as a first thought.  At the rate of return today, the money won’t be there long enough to really perform for them.  TFSA work better.”       - Pat Gamborg