RRSP vs. Non-RRSP

By Mike Howe

RazorPlan’s RRSP vs. Non-RRSP Calculator compares investing in a tax deferred account versus investing in a taxable account. By handling the taxes properly this calculator provides advisors with results that are easy to explain to their clients.

If a 45-year-old client wanted to know if they should save $10,000 into their RRSP or a non-registered account, by using this calculator an advisor can show the best course of action. In addition to the above contribution/savings amount the following information is needed:

Current Age: 45
Planned Retirement Age: 60
# of Years Income Needed: 30
Rate of Return: 5.00%
Annual Contribution: $10,000
Tax Rate: Contribution Years 40%
Tax Rate: Income Years 32%

In this situation the client’s contribution of $10,000 into an RRSP will generate $226,575 at retirement while the after-tax equivalent of $6,000 invested into a non-registered account will grow to $114,941 by retirement. The RRSP generates $10,023 of annual after-tax income and the non-registered will generate only $6,171 of income. In this case the client would generate more after-tax income by putting the annual contribution of $10,000 into their RRSP.

This calculator makes it easy to show client the benefits of tax deferred investing through an RRSP account compared to investing in non-registered accounts.

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