Is it RRSPeeing Time Again

The only decision you’ll have to make if you rely solely  on an RRSP to fund your retirement is the colour of the dog biscuits you will be enjoying throughout your golden years. The Riches to Rags Savings Plan as I call it can turn out to be one of the biggest con jobs of the 21st century. As with many programs set out by government it wasn’t planned that way but over the course of time it could end up being that way. Look at the environment we live in today. Gold is on the rise and will be heading higher as the USD tanks. Try buying gold for your RRSP. Not a chance in hell, it  is not allowed.Those that tout an RRSP as a tax break or an investment tool don’t know the difference between a Ted Spread and a bed spread. What it really is, is a tax deferral scheme. And what direction has the rate of taxes been going since you first socked that 5 or 10 thousand dollars away 10 or 20 years ago? Just for illustrations sake say you put away 20 thousand dollars in an RRSP this year and you are in the  40% tax bracket, you are deferring 8 thousand dollars of tax. You withdraw that money in 20 years.  The government has not had use of that money and has had to borrow against it. So you are gonna  have to pay it back plus interest. At 5% compounded they will want $21,226 or at 4% compounded they will want $17,528. Are you confident that you will be able to serve up those numbers in the coming years? Even if you do, you haven’t made any money. You’ve just kept up with inflation. As with the income trust debacle, the RRSP is a lazy mans game. And lazy men in the end always get their just deserts.  

~ by kanadianbakin on February 9, 2008.