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Registered Retirement Savings Plan (RRSP) is one of Canada’s most powerful retirement tools if you use it intentionally.

RRSP isn’t good or bad. It’s strategic. Used well, it can save tens of thousands in taxes. Used blindly, it can quietly cost just as much.

Only about 21% of Canadians contribute to an RRSP each year. The median contribution is about $4,000, and median RRSP balances for ages 55–64 sit around $100,000, far less than most expect to retire on.

The biggest mistake? Treating RRSPs like free money because of the tax refund.

RRSP contributions reduce tax today, but every dollar withdrawn later is fully taxable. Without planning, RRSP income can spike taxes, trigger OAS clawbacks, reduce GIS, and create a large tax bill in retirement or at death.

Common costly RRSP mistakes:
Contributing without a withdrawal plan
Assuming RRSP withdrawals are cheap
Ignoring OAS and GIS impact
Using RRSP for short-term goals
Not coordinating with TFSA or non-registered accounts
Believing RRSP room resets after withdrawal (it doesn’t)
Skipping an RRSP meltdown strategy

An RRSP meltdown strategy means drawing RRSPs earlier and gradually, often before CPP and OAS start, to keep taxes low later, protect benefits, and reduce estate taxes.

When RRSP works best:
High-income years
Lower tax rate later
Part of a coordinated tax strategy
Income smoothing, spousal planning, and estate efficiency

RRSP is powerful but not one-size-fits-all. The goal isn’t lower taxes today, but it’s lower taxes over your lifetime.

Save this post if retirement flexibility matters. Share it with someone who thinks RRSP refunds are free money.

Disclaimer: This content is for informational and educational purposes only. Not financial, tax, legal, or professional advice.

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