On bumping the annual and lifetime RRSP contribution limits:
Of course the higher annual limits will help the better paid among us. And the even better option is the increase in the lifetime limit for people who can afford to set aside more later in their career – comparable to the “past service contributions” available to those with workplace pensions. And the Pension Adjustment match is also a good idea.
However, the importance of workplace pensions is that the there is a professionally managed fund, risk is spread among a larger group and it can better withstand market crashes. And most important, employer contributions either matching or in the public service, significantly greater than the employee contribution. So while it would be nice if we could all afford to use the tax deferral room provided by pension adjustments and such, the reality is that in the public service pensions, the employer uses our tax dollars to fill that room.
That’s why CARP calls for a universal pension plan to allow people to better match the opportunities now available to the public service. A large professional managed fund that spreads the risk and lowers the investment costs can provide better returns than average people managing their own funds. Giving people more tax deferral room to do more of the same does not go far enough to bridge that gap in returns and ultimately our retirement security.
On moving the RRIF threshold from 71 to 73.
That would be welcome but it does not help people already age 73. CARP advocates a two year moratorium on all RRIF withdrawals and further has always opposed the RRIF system altogether. RRSPs were promoted on the basis that they would help people save for retirement because of the tax deferral and that taxes would be paid at lower rates when people retired. Forcing people to withdraw their savings and pay taxes on them when it was the least opportune time was not part of the bargain.
Reminder of RRSP live blog Friday morning
This is Jon again. A reminder that tax-assisted pensions, retirement, TFSAs and RRSPs are all fair game for a live blog I’m doing for the Post on Friday morning (Feb. 12), from 10 am to 11:30 am. Details here. Judging by the comments on the original Robson post earlier Thursday, it could be a lively session.
Keywords: retirement, pension
