{"id":13697,"date":"2019-01-20T18:45:44","date_gmt":"2019-01-20T23:45:44","guid":{"rendered":"http:\/\/lifeinsurance-orleans.ca\/Life-Insurance-Blog\/why-you-need-to-invest-in-rrsp-now\/"},"modified":"2019-04-16T15:47:23","modified_gmt":"2019-04-16T19:47:23","slug":"3-reasons-why-you-need-to-contribute-to-your-rrsp-now","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2019\/01\/20\/3-reasons-why-you-need-to-contribute-to-your-rrsp-now\/","title":{"rendered":"3 Reasons Why You Need to Contribute to Your RRSP\u2026 Now"},"content":{"rendered":"
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\"Why<\/p>\n

Why is everyone always rushing to contribute to RRSPs this time of year? And does it makes financial sense for you to make extra contributions before the March 1 deadline? <\/em><\/small><\/p>\n

This time of year is often referred to as RRSP<\/a> season, as many of us rush to make contributions before the RRSP contribution deadline on March 1, 2019.<\/p>\n

But what does this deadline mean?<\/p>\n

The contribution deadline ensures your contributions count towards the 2018 tax year, which will then reduce your overall income tax burden and, more importantly, help you save more for your future.
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\"rrsp<\/p>\n

Please appreciate this outdated meme on RRSPs provided by the RateSupermarket.ca team.<\/small><\/em><\/p>\n

The deadline is important and making a few extra contributions is financially savvy. But if you\u2019re in debt or don\u2019t have the extra cash, it can be hard to justify making that contribute more. Wondering if it makes sense for you to make those extra contributions? Here are a few things to consider.<\/p>\n

You can save on your income taxes<\/h2>\n

When we think about income tax we often think about the dollar amount we are required to pay in federal and provincial tax. But what many don\u2019t realize is that as you make more money, the amount of income tax you pay increases.<\/p>\n

One way to save on your income tax is by making more RRSP contributions<\/a>. RRSP contributions are deductible on your total income earned, and therefore, the more you contribute, the less you pay less in taxes.<\/p>\n

Confused?<\/p>\n

Here are two examples of how a contribution can help you save in income taxes.<\/p>\n

Example 1<\/h3>\n

Joe lives in Ontario and earns $50,000 a year. Therefore, he needs to pay approximately $10,500 in federal and provincial income taxes combined.<\/p>\n

However, if Joe contributes $1,000 to his RRSP, he will only be taxed on $49,000. The amount of federal\/provincial income tax he owes would be reduced by $297 \u2013 he would only need to pay $10,203 in taxes.<\/p>\n

Example 2<\/h3>\n

Jillian lives in Ontario and earns $150,000 a year. Therefore, she needs to pay approximately $47,168 in federal and provincial income taxes combined.<\/p>\n

However, if she makes a $1,000 contribution to her RRSP, she will only be taxed on $149,000. The amount of federal\/provincial income tax she owes will be reduced by $464 \u2013 she would only need to pay $46,704 in taxes.<\/p>\n

It should be noted that the more you earn, the more you\u2019ll save on even the smallest contribution. However, you are also paying more in income tax at the end of the day. Jillian and Joe both contributed the same amount to their RRSP. But since Jillian is making more, she is saving more on her income taxes.<\/p>\n

Point is, figure out what your marginal tax rate is, and see if you can contribute enough to your RRSP to lower your income into the next lowest tax bracket.<\/p>\n

If you\u2019re in a lower tax bracket, you\u2019ll pay less in taxes.<\/p>\n

These are the federal tax rate brackets for 2018<\/h3>\n