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 RRSP not for me

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t



Number of posts : 135
Age : 31
Location : Bellevue, WA
Registration date : 2009-03-11

PostSubject: RRSP not for me   Mon Dec 06, 2010 8:15 pm

The more I read and think about it, the more I think RRSPs is one huge scam driven by mutual fund corporations.

Here's one view against RRSP:
http://nlcpr.com/blog/?p=163

Some notes from me:
- 100% of capital gain realized from RRSP are taxable, while only 50% of capital gain from non-RRSP are taxable.
- The concept of RRSP is based on the assumption that compounded growth will occur. But for those of us in our 20s, there is simply no way to forecast factors such as the effects of inflation, market risk, changes to cost of living and tax regulations 40 years ahead. Basically, there is no way to know how much savings is sufficient for retirement and how much your tax savings actually are. I'm sure most people who contribute to RRSP don't do the math and are just blindly pouring money in because it's generally advised.
- For low-income earners, RRSP contributions will not produce nearly enough retirement income. They are far better minimizing current debt and accumulating liquid assets.
- Having retirement income may reduce retirement benefits.
- The excellent marketing from banks and mutual funds that tell you to contribute to RRSPs is comparing a best case scenario vs. a worst case scenario. The best case scenario is your money in an RRSP growing exponentially, with no market risk and inflation - you contribute hard for 40 years and you'll have a steady retirement income. The other scenario they show you is to assume you do absolutely nothing with your money except let it sit in a bank. In actuality, principal is worth gold - more so than occupation or skill, especially for our age. That 50K or so of starting principal could, for some of us, very well be the fuel that helps us generate greater income ahead.
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