You don't save taxes by putting money in an RRSP. You delay paying taxes1. If you plan on having another child within the next few years, you could save money in your TFSA. When you're expecting to have a baby, switch to putting money in your RRSP to catch you up. RRSP contributions reduce your adjusted family net income which will increase your monthly CCB and quarterly GST/HST rebates. Compared to using the space now, it would be a 3-10% increases depending on your current income and number of children.
1 You save money if you drop a bracket/tax rate between deposit and withdrawal but this doesn't sound like your case unless Trudeau actually plans on giving us a true middle class tax cut.
Hey Kvent, this is a great tip -- low income to save in TFSA, then switch it out to RRSP when you have a high income those first couple of years. Doubly so because of the child benefit tip.
There are three very common times when one would drop a bracket/tax rate substantially on the RRSP:
1. When a person early FIREs, and starts drawing down their RRSP.., they can be in a much lower bracket because of the long, long time to draw it down... maybe they have a high TFSA to use, or other investments. This is especially true for high income earners now (e.g. lawyer / financial banker), and plan to FIRE, and you only live on $40k per year... although maybe this supports your comment about the middle income tax cut... because this high income lawyer is not in the group that your point is about...
2. Here is the important one. When you retire, after age 65, you can split RRIF and pension income with a spouse. This immediately drops your income per person in half. So someone contributing at $75k per year would drop down to $37.5k per tax rates year when withdrawing, for the same income. With a paid off house and no kids, a lower income in retirement is a real possibility.
3. A realistic example of value to all middle income is the ability to tap into your RRSP during low income years, such as maternity leave, and in-between jobs, raising kids while working very part time. Let's say a person contributed at the 60k income level for a handful of years, then lose a job / mat leave, goes back to school, and only makes $23k per year through EI or casual work. Topping that off with $10k from the RRSP shifts your marginal tax bracket from 30% to 20% (Ontario, no dependents).
Your point is valid about the wide margin from $47k to $90k having very narrow marginal tax differences (only 5% difference, really), which is where the majority are working. I guess the key is to calculate how much tax is paid out versus any benefits a family is getting back over a 5 year period, between EI, disability, child benefits, and cost of school per child to determine if they are net gainers or losers about their tax situation, to see if the complaint about no tax cut is valid.
Honestly, although recently the child tax benefits cut offs have increased a lot, previously, with $100k - $125k in family income, I only had Harper's $600 per year per child, and while paying 40% marginal taxes, so I understand why the pressure for cuts are now coming at the $100k to $150k brackets, and over, instead of at the under $90k crowd (which is at 33% marginal tax and child benefits). Especially as the ($2k max) income splitting credit (Family Tax Cut) for high/low income earner families was removed in 2016, which impacted the over $100k income group the most...
My guess is that it is the child-free middle income earners that are getting the least tax relief right now.