Newton Financial explains to Ben how an RRSP can help him in the future and the present.
We showed Ben that not only is he saving money for retirement , it will help him out yearly on his tax return as well.
An RRSP Contribution can generate an income after filing your taxes. The contribution can be deducted from your income.
We broke it down further for him:
Ben makes 50,000/year
He lives in Ontario so in 2017 he will pay $8,475 in income tax.
From that he will take home $41,525
Let's say Ben makes a contribution of $5,000 towards an RRSP.
That gives him a taxable income of $45,000
Income tax on a salary of $45,000 in Ontario is $6,938
Remember, Ben would have already paid $8,475 of income tax throughout the year taken from his pay check.
If you subtract what he actually should have paid, $6,938, because of his RRSP contribution from what he DID pay, he would have a refund of $1,537.
Be sure to speak with a trusted, qualified financial advisor to make sure an RRSP is right for you.
We would love to hear from you if you have any questions: