Toronto Star

No penalty on RRSP


Re RRSPs have a significan­t downside, Feb. 19 I put anti-RRSP people in the same camp as anti-vaxxers; neither really know of what they spout.

One of the issues raised by those who advocate against RRSPs is a supposed tax burden that subsequent­ly befalls the estate. There is no such burden or penalty. When one puts money into an RRSP, a portion of it is deferred income taxes. The deferment ends when the money comes out. The tax component was never the individual’s. Herein lies one of the major faults of wealth analysis — too often, the full value of an RRSP is treated as an asset. It is not, unless the tax component is also listed amongst the liabilitie­s.

Another criticism is the potential for RRSP/RIF income to impact OAS payments. OAS is Old Age Security and comes from general tax revenues. We do not, except through general taxes, contribute to OAS. It is, as it says, a bit of income security for those who need it. It is part of a state welfare system. Those who see a clawback of OAS generally are not in need of welfare.

With regards to RRSPs, too much emphasis is made on capital growth rather than income growth. In retirement, one needs income, not capital. The RRSP investor should be focusing on this from day one, and developing a portfolio of equities with solid performanc­e of dividend/distributi­on delivery and growth, in a self-directed, dividend reinvestme­nt account. Brian Williams, Belleville

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