Worth contributing to RRSP?

Labrie wrote: ↑my tax software shows that I will get an extra $434 back for contributing that $1000.

What is your income? If the software is correct, that is showing your maginal tax rate is 43%, which is pretty high. You will defer the tax on that $1000 until your withdraw it.

Rule of thumb normally is, if you expect to make less when you retire, RRSP is a good idea.

My income for 2014 was $110k and change. I expect my income to remain roughly the same until next year when I start paying into my Omers pension. I'm assuming the tax rate is based off gross income, before any deductions?

Labrie wrote: ↑I'm assuming the tax rate is based off gross income, before any deductions?

Correct, the marginal tax rate is the top tax rate that your pay, before any deductions.

Your software is telling you that your marginal rate is 43.4%, which in Ontario is for taxable income over $87907, I think. You will keep reducing your taxes by 43.4% with a higher RSP contributions until your taxable income is down to that amount ($87907 this year). You can test that with your software. What I'm saying is, if it is worth it to contribute $1000 and if you can afford more than $1000, you should consider contributing more so that there is more to grow tax free until withdrawal time in addition to the 43.4% tax savings. But you also need to decide on what to invest in - don't just leave it in savings in the first financial institution you think of.

I suggest you take a look at this website:

http://canadiancouchpotato.com/

I'm 29 years old and I started to invest using one of the model portfolios described there 2 years ago in my RRSP and my child's RESP..
Best move I made concerning my money. You can read a lot of articles on that website it's very instructing and interesting.

Good luck

dr_torch wrote: ↑Correct, the marginal tax rate is the top tax rate that your pay, before any deductions.

I would argue that the marginal tax rate is after mandatory deductions (Pension plan, union dues) and a few others (child care, interest expenses, etc. that are to your benefit to deduct). Then you can determine what RRSP deductions are really worth.