Mind, Body, and Soul is sponsored content from Fresh Ground Financial.

A couple of weeks ago, I introduced you to the Financial FACTS:

They are:
F - Flexibility
A - Accessibility 
C - Control 
T - Tax-Savings
S - Security

Over the years we’ve seen clients have much better results and more consistently build their wealth when they focus on Financial FACTS rather than putting their focus on high rates of return and annual tax breaks.

Tax - Savings.

Do you want to pay less tax today or do you want to pay less tax?


I think you would agree, while taxes are necessary you would like to pay as little as possible.
The way most people try to pay as little tax as possible - and you may be the same - is they take advantage of an annual tax postponement by contributing money to an RRSP. People enjoy the tax refund they receive now, but it can also cause increased taxation over their lifetime. 

Here's why...

When you contribute to an RRSP you do not receive an actual tax break. Instead, you just postpone your tax payment until a later date. You will be fully taxed on all that you have stored in your RRSP plus all the interest growth when you decide to withdraw that money. 

If you happen to be in a lower tax bracket when you withdraw from your RRSP than when you contributed you will end up paying less tax overall, but if your tax rate is the same or has increased when you withdraw, you'll end up paying significantly more taxes overall than if you would have paid all your taxes every year. 

TF: Tax-Free Tools. RRSP: Registered Retirement Savings Plan. 

What has to happen for you to be in a lower tax bracket when you withdraw? 

You must have a lower income or tax rates must decrease. 

Here are some questions you can ask yourself to help you decide if an RRSP is the right place to store your money to save taxes:

1) Do I expect my income and lifestyle to increase before I start withdrawing my future savings?
2) With government debt increasing by over a billion dollars a day, do I think tax rates will increase in the future? 
3) Do I want to pass my future savings to my children, if I pass away without using all of it? 

If you answered "yes" to any of these questions, the RRSP may not be your best choice. 

Instead, it could very well benefit you to pay all your tax today and store your money where all the money you contribute and all the interest growth can be withdrawn as you please, tax-free.  

If you want to learn more about where it might be best to store your future wealth, please join us for our upcoming webinar. We'll discuss tax savings in more detail, show you what tax-free tools are available to you in Canada and how to effectively grow your tax-free future wealth.