Can an RRSP get "too big"?

[NorthernDreamer]

I am in my early thirties still at least 15 years away from FI but am super excited with the idea. My husband and I have taken two extended (12 months+) travelling sabbaticals in our 20s and I am absolutely not worried at all with the thought of the rest of my life to do, well, whatever I darn well want.

I feel like I'm getting obsessed with the details though. Currently we are only investing in registered accounts - we both have a TFSA and an RRSP. Then I have a workplace pension plan. My husband has a separate RRSP matching program through work. So we are a bit scattered. And I'm having trouble imagining how the withdrawal period/post-FI works. If the whole point of the 4% SWR is to have a lump sum that never decreases... theoretically... doesn't there come a time when you are forced to withdraw a certain % every year from RRSPs? Couldn't you get screwed by taxes then if your stash is substantial? Gahhhhh not sure why I am so concerned, but I want to make sure that I'm funnelling out money into the best vehicles possible. How are people investing for a retirement that is 15-20 years away?

[fullpampers]

posting mostly to follow.

From what I gather, at age 71 you have to either withdraw, convert to RRIF or buy an annuity with your RRSP.

I'm guessing you could always transfer to RRIF and withdraw the minimum annual amount, take whatever amount you need to live and invest the rest in either TFSA if you have enough room, or registered accounts.

That was my understanding of the whole deal, but I haven't really given it any real though...

[nobodyspecial]

My FIRE plan is to withdraw from the RRSP first - an amount equal to living expenses + enough to max TFSA each year.

Yes you pay tax on the money you take out of the RRSP, but assuming you are living the minimalist MMM life that should be a lower tax rate than you pay now.
 

[daverobev]

Yes absolutely; the point is when, based on your guesswork of when you'll retire and how long you'll live, the tax you will pay will be greater than if you DID NOT defer it.

Even moreso if you consider Canadian dividends are taxed, currently, at a favourable rate, and that cap gains is taxed at half the rate of income.

If only the TFSA had stuck around at $10k (selfish), but oh well.

If you DIE with a large amount in your RRSP your estate will pay a large tax bill as the whole thing will be liquidated in the year of your death. The RRSP is not nearly as good of a deal as it's made out to be.

Now - if you're earning more now than you will get in retirement it's ok. If you will go for a longish period when you are retired but before CPP/OAS then use those years to draw down from your RRSP.

[GuitarStv]

If you're making more in retirement than you were while working, that's not really a reason for concern is it?  That's the scenario where it would have made more sense not to do RRSP contributions.  In that scenario, who cares if you pay slightly more tax?  You're freaking rich!

As others have mentioned, my plan is to withdraw from RRSPs first and max out the TFSA contribution room each year as it becomes available.

[Mmm_Donuts]

AFAIK most early retirees plan to withdraw from the RRSP first, before any income-tested gov pensions come in, and well before the year when you are forced to turn it into a RRIF. That way you can control your income to the point where you keep taxes low.

I used to think that any early withdrawal from the RRSP resulted in an automatic 10% (or more) tax, plus income tax. That's not true. There is no penalty for withdrawing early, however there is a withholding tax when you withdraw, at a % ranging from 10-30%, depending on withdrawal amount.

This withholding tax counts towards your income tax for the year. For example, if you withdraw over $15k per person, you will have 30% withheld. If this is our only form of income, your taxes will be far less than 30%, meaning you'll get a refund for the difference  the following year.

[nobodyspecial]

Possibly there is an optimal withdrawal ratio to minimize overall tax, otherwise you are lending the government 30% of your "salary" interest free for 6months until you get your refund.

When you are self-employed they send you demands to pay some estimated amount toward your tax twice a year ,but they don't seem to return the favour if you aren't working.   

[meghan88]

If you're making more in retirement than you were while working, that's not really a reason for concern is it?  That's the scenario where it would have made more sense not to do RRSP contributions.  In that scenario, who cares if you pay slightly more tax?  You're freaking rich!

As others have mentioned, my plan is to withdraw from RRSPs first and max out the TFSA contribution room each year as it becomes available.

Would you know where I could find the tax rates for Ontario (where we live now) and Quebec (where we'll live once retired)?  I'd like to figure out the best amount for my spouse and I to withdraw from our RRSPs once we retire at 62, in 4 years or so.  I believe we can defer CPP to 70, correct?  Do we have to take OAS at 65 or can we defer that too?  Just looked on the Service Canada site and it's not clear to me.

[daverobev]

AFAIK most early retirees plan to withdraw from the RRSP first, before any income-tested gov pensions come in, and well before the year when you are forced to turn it into a RRIF. That way you can control your income to the point where you keep taxes low.

I used to think that any early withdrawal from the RRSP resulted in an automatic 10% (or more) tax, plus income tax. That's not true. There is no penalty for withdrawing early, however there is a withholding tax when you withdraw, at a % ranging from 10-30%, depending on withdrawal amount.

This withholding tax counts towards your income tax for the year. For example, if you withdraw over $15k per person, you will have 30% withheld. If this is our only form of income, your taxes will be far less than 30%, meaning you'll get a refund for the difference  the following year.

You can just make several $5k RRSP withdrawals to keep the withholding at 10%. Pretty stupid setup.

[GuitarStv]

If you're making more in retirement than you were while working, that's not really a reason for concern is it?  That's the scenario where it would have made more sense not to do RRSP contributions.  In that scenario, who cares if you pay slightly more tax?  You're freaking rich!

As others have mentioned, my plan is to withdraw from RRSPs first and max out the TFSA contribution room each year as it becomes available.

Would you know where I could find the tax rates for Ontario (where we live now) and Quebec (where we'll live once retired)?  I'd like to figure out the best amount for my spouse and I to withdraw from our RRSPs once we retire at 62, in 4 years or so.  I believe we can defer CPP to 70, correct?  Do we have to take OAS at 65 or can we defer that too?  Just looked on the Service Canada site and it's not clear to me.

You're taxed incrementally.

From 0 - X you get a certain amount of tax.
From X - Y you get taxes slightly higher.
From Y - Z you are taxed higher.

retirehappy.ca/wp-content/uploads/Tax-Rate-Card-2016-rev.pdf

In 2016 in Ontario, you're taxed
0% below 10,011$
5.05% from 10,012 - 11,474$
20.05% from 11,475 - 41,536.00$
etc.

It's important to remember that the money you earn in each tax bracket is always taxed at the amount given.  If you make 10,012$ you will be taxed nothing on the first 10,011$ and 5.05% only on the additional 1 dollar over that.

[nobodyspecial]

Up to $5,000 will have a 10% (5% in Quebec) withholding tax
$5,001 to $15,000 will have a 20% (10% in Quebec) withholding tax
$15,001 or more will have a 30% (15% in Quebec) withholding tax
Non-residents of Canada pay a withholding tax of 25%, except in places where that amount is reduced by treaty.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/rts-eng.html

[Mmm_Donuts]

AFAIK most early retirees plan to withdraw from the RRSP first, before any income-tested gov pensions come in, and well before the year when you are forced to turn it into a RRIF. That way you can control your income to the point where you keep taxes low.

I used to think that any early withdrawal from the RRSP resulted in an automatic 10% (or more) tax, plus income tax. That's not true. There is no penalty for withdrawing early, however there is a withholding tax when you withdraw, at a % ranging from 10-30%, depending on withdrawal amount.

This withholding tax counts towards your income tax for the year. For example, if you withdraw over $15k per person, you will have 30% withheld. If this is our only form of income, your taxes will be far less than 30%, meaning you'll get a refund for the difference  the following year.

You can just make several $5k RRSP withdrawals to keep the withholding at 10%. Pretty stupid setup.

Seriously? The withholding tax isn't based on the overall amount per year? I can't see any info about that on the CRA site.

[Kaspian]

Nah, my plan is to touch the RRSP last.  Let that sucker turn away tax-free capital gains and dividends and compound itself into a behemoth.  All the while, rebalancing for free.  Sure, it gets treated as income when you do take it out, but that'll be when I'm on my last legs and by then, through compounding, it should be a gargantuan chunk of money.  My BEDMAS on this will be a) Get early reduced pension, b) Take out small sums from non-registered (paying capital gains) to pad c) Feed the TFSA with the non-registered or withdraw from the TFSA to keep myself under a certain tax-bracket and finally d) Whatever they make me takeout of the RRIF + my pension should keep me set for life by then.

[Retire-Canada]

Seriously? The withholding tax isn't based on the overall amount per year? I can't see any info about that on the CRA site.

Who cares? It's a pre-payment of tax you owe it's not a tax in and of itself. If you don't owe as much as they take you'll get a refund on your tax return.

[Retire-Canada]

Nah, my plan is to touch the RRSP last.  Let that sucker turn away tax-free capital gains and dividends and compound itself into a behemoth.  All the while, rebalancing for free.  Sure, it gets treated as income when you do take it out, but that'll be when I'm on my last legs and by then, through compounding, it should be a gargantuan chunk of money.  My BEDMAS on this will be a) Get early reduced pension, b) Take out small sums from non-registered (paying capital gains) to pad c) Feed the TFSA with the non-registered or withdraw from the TFSA to keep myself under a certain tax-bracket and finally d) Whatever they make me takeout of the RRIF + my pension should keep me set for life by then.

I'm doing the opposite I'll eat up my RRSP first or at least try to while adding $$ from my RRSP to my TFSA even after FIRE. When I get to mandatory withdrawal age my RRSP will either be gone or small enough that it won't force me to take out more per year than I want to. As a benefit since my taxable income in my later years will be low I won't get dinged for any income tested benefits while still having a bunch of $$ I can access as needed.

The benefit of the RRSP comes from the differential between the tax rates when you put it in and when you take it out. If you let it grow too big you'll actually get no benefit from the RRSP [other than perhaps being able to avoid taxes while re-balancing] and pay more in taxes than had you left that money in a taxable account.

[nobodyspecial]

Seriously? The withholding tax isn't based on the overall amount per year? I can't see any info about that on the CRA site.

Who cares? It's a pre-payment of tax you owe it's not a tax in and of itself. If you don't owe as much as they take you'll get a refund on your tax return.

It is taking a far amount (30%) of your frugal 4% each year and holding onto it for 6-9months.
It is bizarre that if you take it out in weekly $1000 chunks rather than monthly $5000 you "pay" a different rate - even if it is refunded.


 

[Mmm_Donuts]

Seriously? The withholding tax isn't based on the overall amount per year? I can't see any info about that on the CRA site.

Who cares? It's a pre-payment of tax you owe it's not a tax in and of itself. If you don't owe as much as they take you'll get a refund on your tax return.

Um, well I care, I'd like to know how it works. There's a fairly significant difference between 10% and 30%, and as mentioned above, I'd rather not give the government an interest free loan.

[Retire-Canada]

Um, well I care, I'd like to know how it works. There's a fairly significant difference between 10% and 30%, and as mentioned above, I'd rather not give the government an interest free loan.

Okay. In that case I asked my friend Google: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/rts-eng.html

When you withdraw funds from an RRSP, your financial institution withholds the tax. The rates depend on your residency and the amount you withdraw. For residents of Canada, the rates are:

10% (5% in Quebec) on amounts up to $5,000;
20% (10% in Quebec) on amounts over $5,000 up to including $15,000; and
30% (15% in Quebec) on amounts over $15,000.

[Mmm_Donuts]

Um, well I care, I'd like to know how it works. There's a fairly significant difference between 10% and 30%, and as mentioned above, I'd rather not give the government an interest free loan.

Okay. In that case I asked my friend Google: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/rts-eng.html

When you withdraw funds from an RRSP, your financial institution withholds the tax. The rates depend on your residency and the amount you withdraw. For residents of Canada, the rates are:

10% (5% in Quebec) on amounts up to $5,000;
20% (10% in Quebec) on amounts over $5,000 up to including $15,000; and
30% (15% in Quebec) on amounts over $15,000.

Yes, I read that info already. It doesn't answer my question. Are the withholding amounts based on each individual withdrawal, as daveoreb says above, or is it based on calendar year? It's not clear. If daveoreb is right, and it's based in each individual withdrawal, then yes, the rules are dumb. If I want 15k I can just make 3 withdrawals and pay 20% less withholding tax.

[scottish]

I think it's important *when* you start using up your RRSP contribution room.   Especially if you're in a buy and hold scenario and don't receive alot of distributions.

The exception might be the fixed income part of your portfolio, which is probably small if you're in your twenties.

I'm in my peak earning years right now.    I have something like $60K excess contribution room that I'm using to defer the maximum amount of taxes over the next 4 years (until the kids are done with university and I can stop working (or at least stop working so much)).   If I was making $50K instead of what I am now, the income deferral would be much less valuable.

I agree with Guitar Steve and others.   Draw down the RRSP first, including enough to max out your TFSA contributions every year.

[Retire-Canada]

Yes, I read that info already. It doesn't answer my question. Are the withholding amounts based on each individual withdrawal, as daveoreb says above, or is it based on calendar year? It's not clear. If daveoreb is right, and it's based in each individual withdrawal, then yes, the rules are dumb. If I want 15k I can just make 3 withdrawals and pay 20% less withholding tax.

It's based on the withdrawal amount. It doesn't say anything about total for the calendar year and nobody is tracking that total to reference so it wouldn't be an enforceable rule.

[The Fake Cheap]

Yes, I read that info already. It doesn't answer my question. Are the withholding amounts based on each individual withdrawal, as daveoreb says above, or is it based on calendar year? It's not clear. If daveoreb is right, and it's based in each individual withdrawal, then yes, the rules are dumb. If I want 15k I can just make 3 withdrawals and pay 20% less withholding tax.

It's based on the withdrawal amount. It doesn't say anything about total for the calendar year and nobody is tracking that total to reference so it wouldn't be an enforceable rule.

Correct.  Tracking the withdrawal amounts across different institutions would be virtually impossible.  Even within the same bank, the withdraw amounts are not tracked, at least that is what I recall from my past experience working in a bank.  I would be shocked if this has changed. 

[Retire-Canada]

Correct.  Tracking the withdrawal amounts across different institutions would be virtually impossible.  Even within the same bank, the withdraw amounts are not tracked, at least that is what I recall from my past experience working in a bank.  I would be shocked if this has changed.

+1 - My friend Google found me an article on the topic: http://wheredoesallmymoneygo.com/minimizing-the-rrsp-withholding-tax-on-withdrawals/

[Mmm_Donuts]

Yes, I read that info already. It doesn't answer my question. Are the withholding amounts based on each individual withdrawal, as daveoreb says above, or is it based on calendar year? It's not clear. If daveoreb is right, and it's based in each individual withdrawal, then yes, the rules are dumb. If I want 15k I can just make 3 withdrawals and pay 20% less withholding tax.

It's based on the withdrawal amount. It doesn't say anything about total for the calendar year and nobody is tracking that total to reference so it wouldn't be an enforceable rule.

Correct.  Tracking the withdrawal amounts across different institutions would be virtually impossible.  Even within the same bank, the withdraw amounts are not tracked, at least that is what I recall from my past experience working in a bank.  I would be shocked if this has changed.

Thanks for the info.

[Financial.Velociraptor]

#firstworldproblems...

[daverobev]

Nah, my plan is to touch the RRSP last.  Let that sucker turn away tax-free capital gains and dividends and compound itself into a behemoth.  All the while, rebalancing for free.  Sure, it gets treated as income when you do take it out, but that'll be when I'm on my last legs and by then, through compounding, it should be a gargantuan chunk of money.  My BEDMAS on this will be a) Get early reduced pension, b) Take out small sums from non-registered (paying capital gains) to pad c) Feed the TFSA with the non-registered or withdraw from the TFSA to keep myself under a certain tax-bracket and finally d) Whatever they make me takeout of the RRIF + my pension should keep me set for life by then.

Just remember the rrsp if liquidated on death. And once it's an rrif you have minimum withdrawals. With oas and CPP this could bump your rrsp and rrif withdrawals into a higher bracket than when you paid in.

Could. For all I know you've done the maths.

[Goldielocks]

Yes,  as others have said, if your RRSP is too large after age 65, and especially 71, then you will pay more taxes on withdrawl than you put going in.  That is a very bad investment!!

You can split income with a spouse, but realize that OAS clawback starts around 70k/yr of income, and is gone by about 90k/yr of income.

I would target 70k to 80k of income, as a couple, from RRSP, maximum, with the rest as non registered.

--------------------
But MMM made me realize that RRSP are seldom too big, because of early FIRE.

With early FIRE, you are shifting tax burden from high income years to lower income (post early FIRE) years.   As long as you are taking out less than 60k a year, your taxes should be just fine, and 60k per year x 25 year (retire at age 40) is well over $1 million dollars....

So,  max out RRSP early on, then when you are in mid-40's take stock of your goal, and stop contributing if warranted..

[GuitarStv]

Yes,  as others have said, if your RRSP is too large after age 65, and especially 71, then you will pay more taxes on withdrawl than you put going in.  That is a very bad investment!!

Maybe, but it's a problem I'd love to have.  It means that I'm making more in retirement than I did while working . . . and while working I'm saving the vast majority of my money, so that would mean that I'm super rich!  Who cares about the taxes?

[Kaspian]

Just remember the rrsp if liquidated on death. And once it's an rrif you have minimum withdrawals. With oas and CPP this could bump your rrsp and rrif withdrawals into a higher bracket than when you paid in.

Could. For all I know you've done the maths.

Yep, I've done a lot.  I'm not willing to give up all the possible years of sheltered tax-free capital gains and dividends in order to put myself in a lower tax bracket later.  Hell, worrying about being in a higher tax bracket because you're getting a shit-ton of cash is such a weird thing.   People seem to worry about that with RIFFs but not their current salary when it's the same thing to me.  Yes, sign me up to be in the highest tax bracket any day of the week, please--I'll take it!  If I don't need the dough it'll just go into non-registered investments (if my TFSA is maxed for that year). 

And if I die?  Yeah, my estate will have to pay the taxes to get it out.  No big whoop there.

[Retire-Canada]

Yep, I've done a lot.  I'm not willing to give up all the possible years of sheltered tax-free capital gains and dividends in order to put myself in a lower tax bracket later.  Hell, worrying about being in a higher tax bracket because you're getting a shit-ton of cash is such a weird thing.   People seem to worry about that with RIFFs but not their current salary when it's the same thing to me.  Yes, sign me up to be in the highest tax bracket any day of the week, please--I'll take it!  If I don't need the dough it'll just go into non-registered investments (if my TFSA is maxed for that year). 

It seems weird to me to care about getting tax deferrals at all if the net result is paying more net taxes. I'll say it again there is no benefit to the RRSP beyond that differential between the marginal tax rate when you put money in and when you pull money out. And for that benefit you lose all the tax advantages that come from capital gains and qualified dividends which are tax advantaged normally.

You probably understand this, but a lot of people get confused thinking they are benefiting by having the tax deferred portion of funds in their RRSP for decades. This is not true the tax deferred portion of your RRSP gets paid to the Government when you pull the money out plus all the gains from those funds. Holding the tax deferred portion in your RRSP provides no benefit to you other than the differential in marginal tax rates, which is why people are so keen to ensure there is a differential. Otherwise you might as well pay the taxes while you are working and put the money into a non-registered account.

Capital gains in a non-registered account are essentially tax sheltered in the sense you mean above since you decide when to cash in investments same as you decide when to pull money out of a RRSP....well at least until you hit the mandatory withdrawal age.

People worry about income levels vs. taxation in retirement because the implication of a higher tax rate is the requirement to save more money before you can retire which leads to working longer. Optimizing taxation leads to working less or having more money to spend from the same amount of work.  If you have saved so much money that you don't care how much gets eaten up by taxes than you could have retired much much sooner.

[K-ice]

I don't think it can get too big but the withdrawls may be too much.

https://www.woodgundy.cibc.com/wg/reference-library/topics/retirement-planning/rrsp-maturity-options/rrif-minimal-withdrawal.html

Withdrawls range from 4-20% starting at age 65. You must convert to a RRIF at age 71.

My FIL is complaining, due to a bit of other income there is a strong chance he will face a clawback.

Let's say you have a million dollars in your RRSP & you are 80y old.

That is $68,200 dollars a year you must withdraw. With any other income OAS will be clawed back.

But if you are FIRE at 50, as suggested you should start pulling out of your RRSP, & Max your TFSA, so your forced withdraws are lower after 71.

Income from a TFSA will not trigger any income tax or OAS clawbacks. So it makes sence to transfer money over from your RRSP before 71.

Some people are sarcastically,"boo hoo" you make a lot of money & pay tax. So what?

But smart planning on accumulating then spending your RRSP is just a good MMM thing to do.

[daverobev]

Right - it's not the amounts that matter, it's the percentages.

If you're earning $20k now but are a dilligent saver AND are expecting some inheritance plus CPP, OAS, meaning you're likely to spend $55k a year in retirement, the RRSP is not for you.

If you're earning $120k now but are only going to do it for 5 years and plan to live on $30k in retirement, it is absolutely for you.

To Retired@63 - I seem to remember that there is more benefit to the RRSP. It is the same as a TFSA, IF your tax situation is the same putting in and taking out. IE, better than unregistered. Because you are taxed at the start with unreg, and as you go (on any income and cap gains); where with both RRSP and TFSA you are only taxed once. With the RRSP, they take back the percentage you would have already paid at the start with unreg, so the divis and cap gains are still 'free' after the single tax.

It does make sense though it took me a while to get my head round it.

For most people, it's a balancing act (ha, no, for most people I suppose it's not - it's a "I'd like to put something in my RRSP next year").

[Retire-Canada]

To Retired@63 - I seem to remember that there is more benefit to the RRSP. It is the same as a TFSA, IF your tax situation is the same putting in and taking out. IE, better than unregistered. Because you are taxed at the start with unreg, and as you go (on any income and cap gains); where with both RRSP and TFSA you are only taxed once. With the RRSP, they take back the percentage you would have already paid at the start with unreg, so the divis and cap gains are still 'free' after the single tax.

Yes. If your marginal tax rate is the same when you put money in and take money out it's like a TFSA except in one key way - you declare the income in the future when you take the money out so it can affect your income tested retirement benefits. With the TFSA money comes out tax free and is not considered income. So you can have a significant amount of TFSA money supplementing your Government benefits with no claw back of benefits.

[meghan88]

WOW.  Lots of great info and replies on this thread.  I find this funny:

0% below 10,011$
5.05% from 10,012 - 11,474$
20.05% from 11,475 - 41,536.00$

Why bother with a 5.05% tax rate for a range of only $1462?  Why not just do 0% for up to 10,500 or 11,000, and 20.05% above that, and be done with it?  Ahh, governments ...

[daverobev]

WOW.  Lots of great info and replies on this thread.  I find this funny:

0% below 10,011$
5.05% from 10,012 - 11,474$
20.05% from 11,475 - 41,536.00$

Why bother with a 5.05% tax rate for a range of only $1462?  Why not just do 0% for up to 10,500 or 11,000, and 20.05% above that, and be done with it?  Ahh, governments ...

Because the Province and the Federal Government tax in different brackets.

If you move province, those numbers change, as do the rates.

Madness (if you ask me, which you didn't) - I'm from the UK where tax is done once, and - imagine this - very few people actually file a return. Self employed people, people with rental incomes, and rich people (dividends or capital gains over a certain threshold). If you work for a company, your tax is deducted *correctly* (most people don't get a bloody refund!) at source, And. That. Is. It.

My tax paperwork was literally one sheet of paper for most years - an end of year summary.

/shakes head in wonder

*Edit* What I'm saying above is that the Ont tax free amount is less than the Fed one:

Ontario Basic Personal Amount
2016 Personal Amount    2016 Tax Rate    2015 Personal Amount    2015 Tax Rate
$10,011    5.05%    $9,863    5.05%

Federal Basic Personal Amount
2016 Personal Amount    2016 Tax Rate    2015 Personal Amount    2015 Tax Rate
$11,474    15%    $11,327    15%

[GuitarStv]

You don't want to give those freeloaders making 11 grand a year too much of a break.  :P

[meghan88]

You don't want to give those freeloaders making 11 grand a year too much of a break.  :P

:-)

[meghan88]

My tax paperwork was literally one sheet of paper for most years - an end of year summary.

/shakes head in wonder

It sounds very efficient compared with what we have to put up with here.  I often struggle to piece together the rules that would apply to our particular situation, so the advice here is very much appreciated.

[Goldielocks]

Yep, I've done a lot.  I'm not willing to give up all the possible years of sheltered tax-free capital gains and dividends in order to put myself in a lower tax bracket later.  Hell, worrying about being in a higher tax bracket because you're getting a shit-ton of cash is such a weird thing.   People seem to worry about that with RIFFs but not their current salary when it's the same thing to me.  Yes, sign me up to be in the highest tax bracket any day of the week, please--I'll take it!  If I don't need the dough it'll just go into non-registered investments (if my TFSA is maxed for that year). 

It seems weird to me to care about getting tax deferrals at all if the net result is paying more net taxes. I'll say it again there is no benefit to the RRSP beyond that differential between the marginal tax rate when you put money in and when you pull money out. And for that benefit you lose all the tax advantages that come from capital gains and qualified dividends which are tax advantaged normally.

You probably understand this, but a lot of people get confused thinking they are benefiting by having the tax deferred portion of funds in their RRSP for decades. This is not true the tax deferred portion of your RRSP gets paid to the Government when you pull the money out plus all the gains from those funds. Holding the tax deferred portion in your RRSP provides no benefit to you other than the differential in marginal tax rates, which is why people are so keen to ensure there is a differential. Otherwise you might as well pay the taxes while you are working and put the money into a non-registered account.

Capital gains in a non-registered account are essentially tax sheltered in the sense you mean above since you decide when to cash in investments same as you decide when to pull money out of a RRSP....well at least until you hit the mandatory withdrawal age.

People worry about income levels vs. taxation in retirement because the implication of a higher tax rate is the requirement to save more money before you can retire which leads to working longer. Optimizing taxation leads to working less or having more money to spend from the same amount of work.  If you have saved so much money that you don't care how much gets eaten up by taxes than you could have retired much much sooner.

Yay!  Great post

A non Registered account will let you borrow to invest, and get the tax offset there too.

[Kaspian]

Maybe I'm not as concerned here because I'll have a workplace government pension so have very little RRSP room to begin with?  While that account is doing very well, I plan on letting it ride as long as possible.  Whatever I'm forced to drawdown in a RIFF later in life will provide a steady stream (that I won't have to think about) alongside the pension.  I've seen what happens to the very elderly in my family and I don't want to be concerned about investing, rebalancing, or anything else like that when my brain slowly turns to mush.  ...Just send me the cheques on a regular schedule please and I'll be done with it.  (I think keeping my index funds and drawing them down slowly, while fully taxable, is a better plan than all those poor seniors they sucker into annuities.)