Q&A: RRSP strategy

Question: Does it make sense to withdraw funds from my RRSP in years when my income level will be low and hence the RRSP withdrawals will be taxed at a lower rate? The big downside I can see to this approach is the loss of tax-free growth in my RRSP going forward. But then I guess one could transfer the funds to the TFSA (assuming the contribution room exists). Is this a good plan in your estimation or is there something else I am missing? – Doug B.

Gordon Pape answers: The logic is sound as long as you ensure that the RRSP withdrawals don’t push you into a higher tax bracket. By all means, move the money into a TFSA where you will continue to enjoy the advantage of tax-sheltering.

Do you have a money question you’d like to ask Gordon? Send it along and then check out our Q&A section regularly to see if it was chosen for a response. Sorry, we cannot send personal answers.

Photo ©iStockphoto.com/ John Tomaselli