Thursday, 2 June 2016

RRSP Contribution

As I said in the last post, even though I wasn’t feeling to good last month that mood didn’t affect our finances. In fact, our net worth was able to jump by $9876 in May. The biggest bulk of that jump was from our transfer getting finalized and our personalized envelope payout. This ‘envelope’ has one month of G’s salary and can be used incase we need something paid for during our move that isn’t normally covered. Luckily for us nothing extra came up so we had the full amount ($7092.33) available to us. We had two choices with that money:

     1. Have a cash pay out.
  • This would have only netted us $3700.06 after taxes, CPP and EI were deducted.
  1. Roll it into an RRSP (spousal or individual)

  • CPP and EI are still going to be deducted but taxes would be waived for the contribution. 

Important thing to note is this payout is 100% taxable for G, just like our CMHC reimbursement we had last month. Although that is a good amount of money to have in cash we didn't need it. We were able to do the bathroom renovation with cash we had already saved up and currently saving enough to cash flow a new patio door plus our yearly property taxes. So really it was a no brainer for us to roll it into my spousal RRSP - G has the tax benefit and we get the long term growth for extra money we weren’t counting on. 

After CPP and EI were taken out there was a $6607.92 contribution done. G will get the CPP and EI back next year when we do our taxes as he is only a few paycheques away from maxing both his out for the year. This entire move has netted us just a little under $10,000 in extra income G will have to pay taxes on, but I’m confident we made the right decisions to help prevent taxes (in the short term) and will net us much more during the decades it’ll be invested!

- M

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