RRSP Q&A: Max out contributions or invest in something else? - MoneySense

RRSP Q&A: Max out contributions or invest in something else?


From February 16 to 19, 2010, MoneySense.ca’s top financial planners are answering your RRSP questions. For the full list of questions answered — or to submit a question of your own — click here.

My husband and I are 36, we have about $200,000 in RRSPs between us, along with $20,000 in TFSA. We contribute $2,500 a month to RRSPs and hope to retire around 55.

Should we attempt to contribute more (to max out would be about $3,000 a month) or should we lower our contribution and instead invest in something more ‘retirement-tax-friendly’? We have other revenue streams that will be available in retirement such as revenue properties and corporate dividends. —wanttoretirenow

Warren Mackenzie and Ken Hawkins: Assuming  you have no debt and are  going to be saving that money anyway,  then we would recommend you to continue to contribute the maximum. You will get an immediate tax write off which is significant  when you are in the top tax bracket. However, more significant is that the money in the RRSP will grow, sheltered from tax, which will be significant over the next 30 years. As you approach your retirement it might make sense not to contribute to your RRSP.

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