I keep maxing it out my contributions every year and now it's starting to worry me that I won't be getting it out in a tax-efficient way.
For contributing some simple ideas:- estimate what you need for retirement income
- any year your RRSP-adjusted income is less than this it's not a good idea to contribute
- if you are making substantially more now than than your expected retirement income it makes sense to contribute
- if you are making close to what your retirement income is going to be it's hard to say if you'll come out and ahead or behind
- if you expect some big $$ years ahead keep in mind saving your contribution room now means you can level out a big spike in income later
- you are basically trying to decide if you'll pay more taxes on that contribution amount now or in retirement
For optimizing withdrawals:- project your RRSP value to 71 based on the best assumptions you can make
- use the most current mandatory withdrawal rate info you have and see what that would mean in annual income [including any other sources of income you have]
- if the result is too high you want to contribute less and/or withdraw more sooner
- keep in mind there is no penalty for early withdrawals
- understand where the major marginal tax rate changes occur for you [ie. if you want $40K/yr in FIRE and the next jump in tax rates is $55K]
- if your RRSP projections show you'll have too much mandatory withdrawal $$/yr at 71 you know that if your income in an earlier year is $45K you'll want to take an extra $10K out of your RRSP to hit ~$55K
- that reduces your mandatory withdrawal down the road and means you'll pay less tax now [assuming no tax law changes] than if you waited until 71 and had to take say $80K/yr income from your RRSP
You'll need to re-evaluate each year as things change. - you want to even out big income spikes
- avoid large mandatory withdrawals starting at 71
- if you have low earning years take the opportunity to withdraw RRSP $$ at that point
- RRSP withdrawals can be immediately reinvested in Non-Registered accounts or TFSA accounts [if you have room].
http://retirehappy.ca/developing-rrsp-withdrawal-strategies/A detailed spreadsheet will be your friend and let you wargame various possible scenarios. Keep in mind there is a lot of uncertainty in this sort of planning. So you want to avoid big tax hits and capture big tax savings. Once that's done don't get too wrapped up in trying to optimize down to +/-1%. It's probably a waste of time.
