Do you still have to pay tax on your RRSP's if you don't claim them every year?

Question

What I am saying is if I was to not claim my RRSP's every year and cashed them in when I decide to retire, would I still have to pay taxes on them? Has anybody ever done a study to see if it is beneficial?

Answer 1

If you are carrying forward your RRSP contributions in hopes of using them in a future year, and have submitted a Schedule 7 (http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/contributing/unused-e.html) you can cash them out tax free, paying tax on the gains only.

Registering them provides the tax break. It simply defers taxes to when you cash them in. Since you get a tax refund from the investment coming off your taxable income, it will be taxed later.

This would have the same effect as purchasing mutual funds in a non-registered account. You pay capital gains on the difference between the value invested and the value taken out (save a few premiums, etc.).

If you are contributing to an RRSP and not claiming the contribution, be sure to fill out Schedule 7 to protect yourself later.

As well, be sure you're not overcontributing, or there are penalties that would eliminate any advantage to your idea. Information about excess contributions can be found at http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/contributing/excess-e.html

If you would like to know how to withdraw your unused contributions, check out http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/withdrawals/unclaimed/menu-e.html

I hope this helps.

Answer 2

You have to pay taxes on your RRSP's when you cash them in regardless of whether or not you attempted to claim the deductions. The money in your RRSP's grows tax free, but when you withdraw the money, the withdrawn amounts are treated as income and taxed as such (the logic is when you're retired, you're not making as much as when you're working, so you are most likely in a lower tax bracket). There is absolutely no benefit to not claiming your RRSP contributions each year.

Answer 3

Everytime you withdraw RRSP the bank will deduct 10% for tax. If your total earnings in the year including your rrsp withdrawal is less than the basic exemption then all tax contributions will be refunded to you.

Answer 4

WOW! So, you don't take any RRSP out. THEN, you're saying that you will want to take it out in one lump sum! BAD idea!
You will be taxed at a much higher rate.

What is recommended is that you start taking money out in your early 60's and have your RRSP's depleted at 69, so they aren't taxed at the horrible tax rate it'll be by that year.

Answer 5

Yes because a T4RSP is issued when you make a contribution to an RRSP.
Sometimes the Gvt would adjust your return automatically as they receive the exact same slips as you do. If they don't catch it too bad for you.

You would pay tax (at 65) when you cash them in and would then refile earlier returns (restated) for prior years. The only problem is you can only go back 7 years.