For this week’s installment (pun intended) of the ABC’s of the RRSP, I’ll try and answer a few age-old questions:

• Does God exist and, if so, why did he allow the creation of Revenu Quebec?
• Why don’t ALL toilet seats have that mechanism built-in that makes it go down slowly and how does it do that!??
• And, last but not least, what actually happens when I contribute to my RRSP???

Due to time constraints, I’m only able to address the 3rd question at this time, however I will tell you that I learned about something called a “clutch spring” and that there are a scary number of patents in existence that directly relate to toilet seat positioning. Check this out:

OK….onto the topic of the day! When you contribute to your RRSP, it’s no different than putting money into any other investment. With the cash in your RRSP account, you can purchase any investment you like (stocks, bonds, horses, etc.) and even manage the investment yourself. The difference between an RRSP and a “non-registered” investment is its effect on your personal income taxes. For every dollar contributed to an RRSP in a year (the RRSP “year” runs from March 1st to the end of February), you get a dollar deduction from your income on your tax return. Meaning that the income number used to calculate your tax bill in April gets reduced.

So now  that your mind has been officially blown, and just so we understand each other, what this means is:

The more money you make, the higher your tax bracket, the more valuable your RRSP contribution!

For someone earning over $120,000 or so, with their oh-so-fun tax rate of around 50%, if they contribute $10,000 to an RRSP, it’s worth around 50% of that or a $5,000 drop in their tax bill! But that same $10,000 contribution from someone earning $30,000 (in a 30% tax bracket), reduces their tax bill by only $3,000 (30% of $10,000)!

The moral of the story is this: speak to an accountant (pick me!) and/or a financial advisor/planner before making this very important decision about your future and your family’s future…a future that hopefully includes one of the extremely cool toilet seats that you now have to research! Happy hunting!

Sincerely,

The Funny Accountant

Don’t forget to follow me on Twitter if you like what you read!  And as always, if you have tax questions, need advice on your personal taxes, corporate taxes or anything else accounting or business related, please contact The Funny Accountant/President of MK & Associates by phone at (514) 833-1158 or by e-mail at mitch@mkassociates.ca.

Also, for a witty and insightful read, check out the wifey’s blog. It’s funny and good.

And, last but not least, Anthony Housefather, our sitting Mayor here in Cote Saint-Luc, Quebec is running for the Liberal Party of Canada’s nomination in the Federal riding of Mont-Royal. In my opinion, he is clearly the best man for the job and it is my hope that others might have an interest in helping Anthony to achieve his goal of winning the Party’s nomination and making his way into the House of Commons as a Member of Parliament. If you live in the Mont Royal district and are interested in supporting Mayor Housefather’s campaign, please follow this link and sign up as a member of the Liberal Party (a $10 cost for the year). When the time comes, sometime later this year, you can then help nominate Anthony Housefather as Liberal candidate in our riding! Good luck Anthony!