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RRSPs RRIFs and TFSAs -> Maximize your RRSPs

Maximize your RRSPs and/or TFSAs, and Start as Young as Possible!

Even a small amount contributed annually becomes a large amount over time, as shown by the table below.

Annual Contributions Total
Over 30 Yrs
Value in 30 years
Case  Years
1 to 15
16 to 20
21 to 30
5% return 10% return
Case 1 $1,000 $1,000 $1,000 $30,000 $ 69,761 $ 180,943
Case 2 zero $2,000 $2,000 $30,000 $ 45,315 $  69,899
Case 3 zero zero $3,000 $30,000 $ 39,620 $  52,594
Case 4 $1,000 zero zero $15,000 $ 47,103 $ 145,993
Case 5 zero $1,000 $1,000 $15,000 $ 22,657 $   34,950

In cases 1 to 3, a total of $30,000 was contributed to RRSPs or TFSAs, earning either 5% or 10% per year.

In Cases 4 and 5, only $15,000 was contributed in total.

The above results don't reflect the amount of tax that can be saved by contributing to RRSPs.

Tip:  Note the huge difference by contributing earlier.  However, see our article Are you better off to  pay down your mortgage, or contribute to an RRSP?.

If you are in the lowest tax bracket, it may be better to put your money into a Tax Free Savings Account (TFSA) rather than an RRSP - it will still earn income tax-free.  When you are in a higher tax bracket, the funds can be transferred from the TFSA to the RRSP.  This would result in an RRSP contribution equal to the market value of the investments in the TFSA at the time of the transfer. Resources

What is better - TFSA or RRSP?

Rule of 72 - how long does it take to double your investment?

Historical Investment Returns on Stocks, Bonds, T-Bills

Revised: October 26, 2023

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