Q&A: RRSP worries

Question: Is it wise for single people to build up their RRSP when they end up paying twice as much tax as when they worked? Plus their old age pension gets reduced. – Carol D.

Gordon Pape answers: I don’t know where you got the idea that you’ll end up paying twice as much tax on the RRSP money. You’ll pay tax at your marginal rate when you make withdrawals. Most people have less income after retirement than when they were working so their tax rate is lower.

I assume your reference to “old age pension” means Old Age Security (OAS). You will not lose any of your payment unless your net income exceeds a certain level, which will be $67,668 in 2011. That threshold is indexed so it increases annually.

If you are still concerned, use a Tax-Free Savings Account to save for your retirement. The withdrawals are not considered to be income but you do not get a tax deduction for your contributions.


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