Wednesday, September 3, 2014

RRSP Strategies

I liked Preet Banerjee’s recent book Stop Over-Thinking Your Money so much that I decided to read his older book RRSPs: 41 Strategies Canadians Need to Know about our Country’s Greatest Tax-Planning Tool. I thought I knew a fair bit about RRSPs, but Banerjee managed to teach me a few things.

If you decide to read this one, keep in mind that it is 6 years old and that some RRSP rules have changed. As far as strategies go, the biggest change in that time has been the introduction of the TFSA.

The 41 strategies are aimed at a wide range of investors. The earlier ones tend to be for beginners, and the later ones are more advanced. Banerjee’s command of RRSP rules and strategies make it worthwhile to read this book with the caveat that you should confirm that anything you plan to use hasn’t changed since 2008.

The following are some points that were interesting or new to me. Be sure to check that the rules haven’t changed.

If you hold your mortgage in your RRSP and fail to make payments, a mortgage trustee can initiate a power of sale to protect your RRSP. This means your own RRSP would take away your house!

Individual Pension Plans (IPPs) are completely new to me. Apparently they are a way for high-income Canadians to shelter more of their income than is possible with RRSPs alone. The rules for IPPs seemed to have changed in 2011, so I’m not sure of their status now.

If you plan to make RRSP withdrawals between ages 65 and 71, you may prefer to convert the RRSP to a RRIF before you’re forced to at age 71. The reason is that minimum RRIF withdrawals are considered pension income, but RRSP withdrawals are not, and there is a $2000 pension income credit.

For those still working past age 71, an interesting strategy is to make an over-contribution to an RRSP in December of the year you turn 71. The part of this over-contribution above $2000 will be penalized at 1% for the month, but you can then take the RRSP deduction the next year.

Some of the more advanced strategies involving leverage come in the last two sections. There are quite a few moving parts, and Banerjee is careful to point out that these strategies are not suitable for everyone. I found them useful to open my thoughts to a wider range of possible approaches to growing RRSP savings. I’ll likely stick to a simple plan, but I like to understand other ideas to see what I might be missing.

Overall, I’m glad I read this book if for no other reason than to remind me that there is almost always more to learn about RRSP rules and strategies.


  1. Those are some interesting strategies for sure. I didn't know about any of the ones you weren't aware of either. Good information!

  2. Nice article as always.
    This is precisely why I am of the opinion that it makes sense to at some point a few years before retirement to hook up with a tax knowledgeable planner. It's easy to make your nest egg. No need to pay a lot of fees during your earning & growth years. The time when good second opinion advice is later. One or two missed technicalities and you could miss out on a lot of tax or other savings. The system seems almost deliberately made to be complicated to confuse the average person. How would anyone figure out every useable strategy on their own?

    1. @Paul: Some strategies must be planned for well in advance. So, whether you learn yourself or rely on an expert, it might make sense to get some thoughts early on as well as late in the savings process.

  3. I believe I first heard of Preet when another blogger interviewed him about his RRSP book. Preet quipped that USA sales were surprisingly weak.

  4. I was aware of the RRSP > RRIF strategy, since I intend to take this on myself and I was looking at this for my parents in recent years.

    I still have more to learn how to optimize the benefits of this account, but that knowledge is growing thanks to very sharp minds like Preet.


  5. Is there any similar book on TFSAs?

    1. @Anonymous: I'm not aware of any comparable books on TFSAs. Gordon Pape has a TFSA book, but it contains enough questionable material that I wouldn't put it in the same class as Preet's book. Here's the link to my review of Pape's book:

  6. The book you're reviewing is from 2008.

    There are other RRSP books:

    Moolala Guide to Rockin' Your RRSP: Start Rockin' in Five Easy Steps.
    Bruce Sellery 2014

    RRSPs: The Ultimate Wealth Builder
    Gordon Paper :-) 2014

    The RRSP Secret: Defend and Build Your Wealth with this Powerful Investment Strategy
    Greg Habstritt 2010
    This book seems to be mostly about real estate

    I checked amazon, and the only book that I can find on TFSAs is Gordon Pape's.

    About RRSP books, I'm looking for something comprehensive: I don't mind the extra time and money needed for such a book.

    1. @Anonymous: These books you list have their merits, but they are not in the same category as Preet's book. I'd be pleased to see a revised edition from him.