RRSP contribution question

[mgarf]

I've made about 80k this year, but am expected to make ~200k if not more next year.

I have ~50K in RRSP contribution room and I have 20k I would like to invest.

Does it make sense to invest this money next year when my tax bracket is higher, thereby earning a higher refund? Is there anything I'm not getting?

Thanks for the help!

[RichMoose]

With that kind of income jump it probably makes sense to defer to the next tax year. If you wait until January to contribute, you can make the contribution, file a T1213 application with the CRA, give the approval notice to your employer, and basically have no tax deductions off your paycheque for the 2018 tax year.

If you're self-employed then it shouldn't be an issue as you probably pay taxes in lump-sum anyways.

[Prairie Stash]

You should take the $20k and put it into your TFSA this year. You didn't mention if TFSA was maxed.

Next year, save some of the $200k and max out the RRSP to the tune of $50k plus the room from 2017. I generally find people forget that they have the opportunity, when getting LARGE increases to pay the RRSP out of pocket with the large earnings they suddenly have. If the large earnings don't materialize (unforeseen circumstances), you still win. If you currently live off $80k/year, I doubt you'll find it hard to save $60k next year from the extra $120,000 in earnings.

Beginning of year is for TFSA, end of year is for RRSP unless you fill in form T1213.

[TrMama]

After 2018 will you always earn 200K, or is this a one off? Is the 200K a sure thing? Do you also have a pension or defined benefit plan that will eat into your contribution room?

I'd do a little chart to help you figure out how long to draw out the RSP contributions. If you don't contribute any money to your RSP you'd have the following amount available each year.

Year    Available RSP Room
2017     $50,000
2018     $64,400
2019     $90,410

To get these numbers you just add the existing room to either 18% of the previous year's income, or $26,010, whichever is lower. The max RSP room amount goes up by a small amount each year, so the 2019 amount will be slightly higher than I calculated here.