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Have you ever been to the emergency room? What for?

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  • Nov 5th, 2013 1:53 pm
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Jun 26, 2012
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Have you ever been to the emergency room? What for?

Have you ever been to the emergency room? What for?
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Deal Addict
Sep 5, 2009
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Unless you will be desperate for money, there is no benefit. You can never re-contribute that money so that is a major loss. The smartest thing to do is to look at your salary over the 2 years, meaning live on $50,000 year 1 and 2.
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Have you ever been to the emergency room? What for?
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Mar 25, 2005
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jeremyhalifax88 wrote: dgnr8
I don't want anything to do with an RRSP in the future.
So I won't make any money by doing that?
What do you mean by not doing anything with an RSP later? Are you retiring? Going to school? What does your future income look like?
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Sep 5, 2009
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By contributing $13,000 to your rrsp you will get a larger refund but what you are trying to do is short sighted. The next year you will then have to pay income tax on the $13,000. It will be at a slightly lower tax bracket, but definitely not worth it.
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Have you ever been to the emergency room? What for?
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Mar 25, 2005
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jeremyhalifax88 wrote: I'm 25 and I don't see a need for RRSPs right now.. Unless someone can convince me otherwise.
Then your plan really makes no sense. Read up on RSPs.
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Nov 28, 2010
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jeremyhalifax88 wrote: I'm 25 and I don't see a need for RRSPs right now.. Unless someone can convince me otherwise.
Start with your rrsp so down the road, you actually have $$ for retirement.
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dgnr8 wrote: By contributing $13,000 to your rrsp you will get a larger refund but what you are trying to do is short sighted. The next year you will then have to pay income tax on the $13,000. It will be at a slightly lower tax bracket, but definitely not worth it.
Why wouldn't it be worth it?
In Nova Scotia, the average tax rate is:
14% at $25K of income; and
26.83% at $70k of income.

source http://www.ey.com/CA/en/Services/Tax/Ta ... rsonal-Tax

EDIT: Actually, OP needs to consider timing differences too.
- The contributions may need to sit in his account for a certain amount of time before being withdrawable.. so if he makes the deposit in January 2014 for his 2013 tax year, they might not let him withdraw the amounts in February. (See first time homebuyer's plan for hold periods.. something might be similar in this case)
- Sure he gets the tax refund up front in early 2014 when he files his taxes, but when he withdraws the money from the RRSP next year, they might withhold taxes based on his 2013 income (because there is no real proof of 2014 income). This would result in a timing difference and he would potentially get a refund in 2015 (which may be less helpful to him).
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jeremyhalifax88 wrote: What if I deposit 13k to my rrsp right now and withdraw it end of 2014. I will potentially make a couple hundred dollar profit in return for losing my rrsp space?
You will have to pay huge penalty if you withdraw early.

You can be only allowed to withdraw out of your rrsp if you're planning to buy a house (first time home buyer) or going back to school.
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Sep 10, 2012
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Reyshel01 wrote: You will have to pay huge penalty if you withdraw early.

You can be only allowed to withdraw out of your rrsp if you're planning to buy a house (first time home buyer) or going back to school.
You can withdraw from your RRSP at any time, it just counts towards your income that year for tax purposes. There's not a penalty beyond the fact that it's taxed when you take it out (because you avoided tax when you put it in). It can make sense to take money out of RRSP in a year where your income drops (e.g. this post).

Home buyer's / education plans are special withdrawals that don't get taxed so long as you re-contribute the money to your RRSP on schedule. There are limitations on how long money has to stay in to take advantage of those programs (I think 90 days), but I don't think that applies to a regular withdrawl.
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Jan 4, 2009
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jeremyhalifax88 wrote: What is Reyshel01 saying then? "You will have to pay huge penalty if you withdraw early.
I'm guessing that what's being described is the withholding tax...it's not a "penalty". Funds withdrawn from an RRSP have a certain percentage remitted to the CRA on your behalf. Once you file your income tax for that year, you may get some of it back.

For an amount $15K and greater, the amount withheld is 30%.
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Mar 24, 2008
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jeremyhalifax88 wrote: Okay so lets say

2013:
I earn $60000 this year(low side),
I'll owe about $14,911 in taxes: $8,495 in federal tax and $6,416 in provincial tax.
I'll invest $13,600 in RRSPs
I'll owe about $9,871 in taxes: $5,503 in federal tax and $4,369 in provincial tax.

Savings: $5040 tax return.

2014
I'll earn $20,000 plus I'll take out my $13,600 RRSP
I'll owe about $5,839 in taxes: $3,384 in federal tax and $2,455 in provincial tax.

$5839-($5040+$151.2)(money saved from 2013 tax return+interest) = I'll only have to pay $648 in taxes for 2014. So whatever I pay in taxes for 2014, I'll be pretty much banking(minus EI and CPP).

Does this make sense?
Also do I have till March 2014 to make my 2013 RRSP contribution?
Yes, you are correct. Posters who are telling you that there will be a "penalty" don't know what they're talking about.

The only argument against what you want to do is that your RRSP "room" will be lost forever. Basically what that means is that if you have a 13k room and you invest today and take it out a year from now, your available RRSP room a year from now will be $0. If you don't care, go ahead and do this, it makes sense to me.
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Sauerkraut wrote: I'm guessing that what's being described is the withholding tax...it's not a "penalty". Funds withdrawn from an RRSP have a certain percentage remitted to the CRA on your behalf. Once you file your income tax for that year, you may get some of it back.

For an amount $15K and greater, the amount withheld is 30%.
+1, Thank you.
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is your military pension defined benefit? or defined contribution?
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Mar 31, 2013
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jeremyhalifax88 wrote: What is Reyshel01 saying then? "You will have to pay huge penalty if you withdraw early.

You can be only allowed to withdraw out of your rrsp if you're planning to buy a house (first time home buyer) or going back to school."?
As Kaylya said, Reyshel01 is wrong (not sure why people post stuff when they aren't sure of the rules themselves). If you contribute money this year and withdraw the money next year, there are no penalties at RRSP penalties at all (except maybe a very small fee around $50 from the institution your money is in).

Doing what you are suggesting of contributing in a year you make a lot more and then taking out in a year that you make less is a positive way to use your RRSP. Your cost is the loss of RRSP room.
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Aug 12, 2006
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poorwingman wrote: Why wouldn't it be worth it?
In Nova Scotia, the average tax rate is:
14% at $25K of income; and
26.83% at $70k of income.

source http://www.ey.com/CA/en/Services/Tax/Ta ... rsonal-Tax

EDIT: Actually, OP needs to consider timing differences too.
- The contributions may need to sit in his account for a certain amount of time before being withdrawable.. so if he makes the deposit in January 2014 for his 2013 tax year, they might not let him withdraw the amounts in February. (See first time homebuyer's plan for hold periods.. something might be similar in this case)
- Sure he gets the tax refund up front in early 2014 when he files his taxes, but when he withdraws the money from the RRSP next year, they might withhold taxes based on his 2013 income (because there is no real proof of 2014 income). This would result in a timing difference and he would potentially get a refund in 2015 (which may be less helpful to him).
They don't withhold taxes based on your income, they withhold based on the amount you take out. Under $5,000, it's 10%, between $5001 and $15,000, it's 20%, more then $15,000, it's 30%. You can make multiple withdrawls to get around this. Make two $5,000 withdrawls a day apart and have $500 each ($1,000 total) withheld for tax, make a $10,000 withdrawl and have $2,000 withheld.
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jeremyhalifax88 wrote: I'll be making maybe $70,000(2013) this year and estimating $25,000 next year(2014).
I have $13,000 of RRSP room..
Should I max out my RRSP this year(2013), get a good tax refund(take the refund and put it in my TFSA), Then withdraw everything from my RRSP next year(2014) when I'm making less? Would there be any benefit to that?

Judging by how many threads you have started on RFD for RRSP and TFSA issues, I suggest you get a financial advisor and listen to him/her.

rrsp-question-1381968/
somehow-put-too-much-money-my-tfsa-1377462/
maxed-out-my-tfsa-now-what-1357880/
do-rrsps-work-way-1346570/
paying-taxes-your-savings-account-interest-1321716/
how-grow-tfsa-1308258/
portfolio-help-1257356/
what-do-i-do-1255890/
my-investment-next-5-10-years-help-1233981/
my-1-5-year-portfolio-1233670/
rrsp-question-1233492/
rrsp-help-1232893/
rrsp-spy-tfsa-bmo-selectclass-growth-1228149/
i-dont-know-wtf-i-am-doing-my-tfsa-1227687/
my-rrsp-1227475/
bmo-pre-made-portfolios-1227426/
im-dumbfounded-when-comes-investing-1224771/
how-get-into-investing-into-stocks-1220258/
still-cant-decide-what-do-my-money-1218986/
another-where-put-my-money-thread-1217404/

Or, option #2, QUIT TROLLING:

Don’t feed the troll people.

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