Is it worth sinking more money into RRSPs this close to retirement or should I keep cash flow more fluid? I can't seem to get a straight answer from my bank.
I have no idea about the cost of RVing. About RRSPs, it all depends...on information that you haven't provided in this post...and I am too lazy to go searching for your other posts.
Basically, RRSPs work best if you put money into them when you are in a high tax bracket, let it grow over time, and take it out when you are in a lower tax bracket. You defer the taxes to that time, but you must eventually pay them. If you are in a low marginal tax bracket when you put the money in, your tax break on your current RRSP contribution will be relatively low. You get the biggest immediate bang for your RRSP buck if you are a high income earner.
Check out the Walter Harder site
Walter Harder & Associates Home Page and play with some scenarios. I have attached a hypothetical scenario in which you receive $60K in pension (or any) income...and that includes the income from RRSPs. If you lived in Ontario in 2011 you would pay a total of $12,116.82 in taxes, or 20.19% of total income. Note that the marginal tax treatment of capital gains is the most favourable and ordinary income, the least favourable.
If you are currently in the highest tax bracket, and can wait to use your RRSPs until (a) they have grown tax free and (b) you have little or no other income, RRSPs are worthwhile. If, on the other hand, you are putting money into RRSPs now in the 31% marginal tax bracket, and taking it out next year in the same marginal tax bracket, that's not such a good deal. Another point to watch if you have a lot of money in RRSPs: once you hit 71, you must make mandatory withdrawals. If that occurs while you also have other income, you may end up in a high tax bracket and pay too much tax on it.
In fact, if you are going to be in a situation where you have no "income" and have a decision to make in ER as to where to draw down first, your RRSP might be a good place to begin. That's because, if it is your only "income", the tax you pay on it will be very low. And by leaving a smaller residual amount, your mandatory minimum withdrawals will decrease. All this only works if you have other, post taxed funds that you can use later.
Not the clearest explanation, but I hope that helps. You might find it helpful to check out the Canadian Money Forum and Financial Webring Forum, both of which have many threads on RRSPs.
