Weekend Reading: Maxed Out RRSP Edition

Unused contributions available for 2018 = $0. That’s what my RRSP contribution history will say when I check CRA’s My Account later this year, once tax season is over. You see, I finally maxed out my unused RRSP contribution room during the first 60 days of 2018.

I built up a lot of RRSP contribution room in my twenties when I worked in the private sector. While I was able to put some money away for retirement, I was never able to fully max-out my available room each year.

I began saving in 2000, setting aside a whopping $400. Between 2001 and 2004 I contributed a total of $4,950 to my RRSP. Then from 2006-2008 I put aside $9,000, $10,200, and $9,100 into my RRSP, taking advantage of year-end bonuses and a company matching program. Times were good.

In the next three years my wife was diagnosed with MS and went on maternity leave after our first child was born. RRSP contributions were scaled back as we sorted out our new financial reality. I contributed $2,500 (2009), $1,500 (2010), and $2,500 (2011) during that period.

We eventually found our footing and I once again started to make big contributions, finally catching up on years of accumulated contribution room. I saved $10,000 in 2012, and then in 2013 took out an RRSP loan to make a $24,000 contribution.

I set aside another $10,000 in 2014, and then scaled back again to $3,300 in 2015 as we dealt with some debt from our basement renovation and finished off our car loan payments.

With our debts paid off or sitting at a manageable rate I boosted up RRSP contributions with the goal of erasing all that unused room within a couple of years. I set aside $7,500 in 2016 and then $6,200 in the 2017 tax year to use up the last of our contribution room. What a great feeling!

Going forward, due to the pension adjustment at my public sector job, I’ll only be able to create about $3,500 per year in new RRSP contribution room. So my plan is to max that out every year (either at $300 per month or in one lump sum payment) and then apply the same rigour to my wife’s and my TFSA – catching up on years of missed contribution room.

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This Week’s Recap:

On Monday I took a page out of Warren Buffett’s playbook with my inaugural ‘letter to householders‘.

On Wednesday Marie shared some ways to cut your grocery bill.

And on Friday Marie continued her monthly series with a look at four things to take care of in March.

Weekend Reading:

An alarming piece in The Atlantic about what life without retirement savings looks like. Many seniors are stuck with lives of never-ending work— a fate that could befall millions in the coming decades.

Why five and not eight? Here is some interesting research on how round number bias can reduce your nest egg.

The Globe & Mail has some tips on how to save enough to retire after you hit the big 5-0.

A new paper is challenging traditional advice to save more for retirement, arguing that working longer is better than saving more.

Some financial shortcuts to avoid and use when saving and investing for retirement:

Would you relocate to find a new or better job? Labour mobility has fallen by half since the 1970s. Statscan recently asked Canadians why they won’t move to find work—and the answer is a little depressing.

Ben Carlson looks at the constant struggle to strike a balance between enjoying life now and ensuring we have the resources to enjoy life later:

“Explain to me again why enjoying life when I retire is more important than enjoying life now.”

The Four Pillar Freedom blog takes an in-depth look at sequence of return risk and what it means for your retirement.

Jason Heath says it sometimes makes sense to withdraw from your RRSP, like when your income drops or if one partner stays home with the kids.

Parents could be missing out on thousands of dollars in tax refunds — here’s how to claim it.

Mark Seed at My Own Advisor shares a detailed post on overlooked retirement income and planning considerations.

The Million Dollar Journey blog says the best indexing solution is Vanguard’s new all-in-one balanced indexed ETFs.

Finally, The Blunt Bean Counter Mark Goodfield laments the fact that 62 percent of Canadians do not have a will, and lists some famous people who died without having a will in place.

Have a great weekend, everyone!

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10 Comments

  1. Zach @ Four Pillar Freedom on March 4, 2018 at 6:27 am

    Thanks for the shout out! 🙂

    • Echo on March 5, 2018 at 7:31 am

      My pleasure!

  2. Cheryl on March 4, 2018 at 10:48 am

    I’m currently maxed out on my TFSA and putting money aside for 2019 contribution, but nowhere near close with the RRSP. In the past most of my RRSP contributions have been through employers, around $2500/year. My tax refunds over the years haven’t been remarkable, a couple of hundred back. However I find the years when I haven’t contributed to an RRSP I’ve gotten $100 or $200 more in a refund. In 2016 I didn’t contribute to an RRSP and got my highest tax refund ever, $1000! I haven’t given my 2017 info to my accountant yet but I contributed around $2500 to an RRSP in 2017 so expecting a low refund again. I’ve never worked for a company that gives bonuses so it’s not like extra money from there could go to an RRSP contribution. For 10 years I worked for a company that gave $75 Christmas bonus to full time staff and $50 to part timers. Taxable of course, came off the next paycheque stub. Not a big enough deal to think about putting into an RRSP! I’d say a lot of people are in the same position as I am. RRSPs don’t make a lot of financial sense when it comes to a tax benefit but we sure get nailed for taxes when we withdraw!

    Thanks for the links to the other articles. Good weekend reading!

  3. Chris on March 4, 2018 at 4:25 pm

    My RRSP unused amount is over 60K (I’m 41). I cannot even imagine ever being able to max it out.

    • Echo on March 5, 2018 at 7:40 am

      Hi Chris, you have to remember that my RRSP was often the only vehicle in which we saved. We skipped out on TFSA contributions for year and so I was able to direct the majority of our savings into my RRSP. Couple that with the pension adjustment reducing any new contribution room to around $3500/year for the past eight years and you can see how I was able to make a significant dent into that unused contribution room every year.

  4. Bob Lin on March 5, 2018 at 1:16 am

    Re. The “working longer works better than saving more for retirement” news story. Is this some anti-retire early story to keep the workforce trapped in their daily grind! The story suggests that working an extra 6 months results in the same pension as upping your savings by 1%. So, (and I’m playing loose and fast with the numbers), if I work an extra 10 years, I can reduce my savings rate by 20%. Excellent, I’m upping my mortgage to buy a boat I don’t need. The author of the story misses the main point of saving for retirement, so that we DON’T have to work!

    • Echo on March 5, 2018 at 7:45 am

      @Bob Lin – It’s an interesting dilemma, isn’t it? On the one hand, why wouldn’t you want to strive for early retirement and get out of the rat race? On the other hand, why save so much that you deprive yourself from any of life’s little luxuries during your working years?

      That’s why I advocate a balanced approach. Not early retirement extreme, not working until you’re 80, but giving yourself enough of a financial cushion to spend the years 55-75 (or so) on your own terms.

      • Bob Lin on March 5, 2018 at 8:55 am

        My wife agrees with the balanced investing/life approach you propose. It frustrates me a little because once I know where I’m heading, I want to get on with it. I’ve even considered investing weekly instead of bi-weekly so that I at least feel like things are moving forward faster!

        Anyway, we’ll be upping our savings rate by 0.25% this week, and all we have to do is close our bank account with one of the big banks – no more monthly fees for us.

  5. Sb on March 5, 2018 at 5:42 am

    Would you not want to max out your TFSA before your RRSP? If you’re in a public sector pension, you could have the potential that your tax bracket would be very high upon retirement.

    • Echo on March 5, 2018 at 7:47 am

      @Sb – I expect our tax bracket to be about the same in retirement. Eventually I’ll catch up and max out our TFSAs, too, so it doesn’t really matter which of them I prioritize. My thinking is that I might want to leave the workforce early and focus on my writing and online business – in which case my highest salary earning years would be behind me, not in front of me.

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