Canadian Capitalist Logo Dark
No Result
View All Result
Friday, August 5, 2022
  • Login
  • Register
  • Home
  • Economy
  • Markets
  • Real Estate
  • Tax Savings
  • Investment Guides
Subscribe
Canadian Capitalist Logo Light
  • Home
  • Economy
  • Markets
  • Real Estate
  • Tax Savings
  • Investment Guides
No Result
View All Result
Canadian Capitalist Logo Mobile
No Result
View All Result
Home Tax Savings

Low savings, not RRSP Contribution Limits are the problem

by Ram Balakrishnan
February 15, 2010
Reading Time: 2 mins read
132 1
0
how dividend income is taxed in canada
153
SHARES
1.9k
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

A recent C. D. Howe report titled, Cutting Through Pension Complexity: Easy Steps Forward for the 2010 Federal Budget, recommends that the Federal Government raise the contribution limit for RRSPs from 18 percent to 34 percent of earned income (and correspondingly, the maximum dollar amount from $22,000 to $42,000) in the upcoming budget. Recommendations such as this makes you wonder which planet the C. D. Howe Institute inhabits. On Planet Earth, contribution room isn’t an issue at all but using up already available contribution room is.

According to Statistics Canada, a mere 31% of eligible tax payers actually made a contribution for the 2007 tax year. The average contribution to a RRSP was $5,412 but the median contribution was only $2,780. The contributions used up just 6.0% of total contribution room available. The data suggests that the vast majority of Canadians have accumulated vast amounts of RRSP contribution room. Only a tiny fraction of Canadians have used up all their contribution room and would benefit from any boost in RRSP limits.

The C. D. Howe report is silent on the fact that the introduction of the Tax-Free Savings Account has already essentially boosted contribution limits to a tax deferred retirement savings account. Joe Canadian, an Ontario resident who earned $80,000 in 2008 would have a 2009 RRSP contribution room of $14,400. Joe can save another $5,000 for his retirement in his TFSA. While the TFSA contribution does not result in a tax deduction, it has roughly the same as effect as contributing another $8,833 to Joe’s RRSP account. If Joe maxes out both his RRSP and TFSA, he is in effect saving 29% of his earned income. The Joes of the world already have plenty of retirement savings room. But boosting contribution room will achieve little in addressing the savings problem of the vast majority of Canadians.

Related posts:

  1. Reader Question on US Dollar Dividends in a RRSP
  2. Ideas for your Tax-Free Savings Account (TFSA)
  3. What’s New in StudioTax 2008?
  4. Transferring the Family Cottage: Tax Issues
Share61Tweet38Share11

Get real time update about this post categories directly on your device, subscribe now.

Unsubscribe
Previous Post

This and That: MLS Access, RRSP Season and more…

Next Post

New Mortgage Rules and Rental Properties

Ram Balakrishnan

Ram Balakrishnan

Related Posts

Investment Guides

A complete guide to TFSA accounts in 2022

January 31, 2022
2k
Why you cant afford a house in Canada

Why You Can’t Afford A Home In Canada?

January 24, 2022
270
investing benefits
Investment Guides

Finding a Financial Advisor, Part 1

June 19, 2021
2k
investing in bitcoin

Is it time to invest in Bitcoins again?

May 13, 2019
2k
when do reits liquidate
Uncategorised

Performance of Currency-Neutral S&P 500 Index Funds

January 19, 2014
1.9k
is mortgage interest tax deductible
Uncategorised

The 2013 Sleepy Portfolio Report Card

January 12, 2014
1.9k
Next Post
insurance company annuities

New Mortgage Rules and Rental Properties

Please login to join discussion
Canadian Capitalist

© 2022 Canadian Capitalist

Navigate Site

  • Home
  • Advertisement
  • Contact Us
  • Privacy & Policy
  • Other Links

Follow Us

No Result
View All Result
  • Advertisement
  • Contact Us
  • Home
  • Economy
  • Real Estate

© 2022 Canadian Capitalist

Welcome Back!

Sign In with Facebook
Sign In with Google
Sign In with Linked In
OR

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Sign Up with Facebook
Sign Up with Google
Sign Up with Linked In
OR

Fill the forms below to register

*By registering into our website, you agree to the Terms & Conditions and Privacy Policy.
All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
two man and woman standing on doorway
The man who does not read has no advantage over the man who cannot read - Mark Twain
Go to mobile version