Maybe RSP's are not such a great idea

Hi:

The advertising push is on.The final day to put money into your registered retirement savings plan is the end of February. However, registered savings plans are not always the best option.

Say, for example, you have invested in uranium stocks and have made tremendous capital gains over the past several months.  Sure, your RSP is much larger, but when you take that money out, tax is due on the total amount.

Capital gains held in a cash account receive different tax treatment.  Only 50% of the capital gain is taxed and the other 50% is tax free.  So if you made $2,000 capital gains in two accounts, one an RSP and one a cash account, and you took that money out, you would pay tax on the full $2000 from the RSP but only on $1000 in the cash account.

Dividends also receive preferential treatment.

There are plenty of people who scrimped to put away RSP contributions when their income was not great.  Now that they are retired, they are often taking money out at a higher tax rate than the tax benefit they received. 

Others argue that the best retirement fund is real estate.  Perhaps this might not be true in some areas such as Vancouver or Toronto, but this certainly bears consideration in many areas of the country.

 Ignorance is not bliss.

Mahara