Q&A: Unused RRSP room

Question: My spouse and I are both retired and receive pensions. We also both work part-time. We live in Quebec and have a marginal tax rate of 38% each. We have unused RRSP contribution room of about $40,000. My question is whether we should use that room to make RRSP contributions. If we do, what will be the impact on our taxes? – Ginette L. (translated from French)

Gordon Pape answers: No. If you have the money available, the RRSP option should certainly be considered. You’ll reduce your tax payable by $380 for every $1,000 you contribute. However, given your relatively high income level, a Tax-Free Savings Account (TFSA) is also worth a look. You won’t get a deduction but you’ll pay no tax on the money when you withdraw it. The best course may be to make the RRSP contributions and then put the refund into TFSAs.

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