You owe it to yourself to earn more money but how you ask? Sure you could ask your boss for a salary increase, but with this recession....highly unlikely!!!. You could work extra hours or overtime, but that's not happening since business is slow. What is a good worker like yourself to do in these tough economic times?
So yesterday I sent in a request to my RRSP issuer to pay me $5,000.00!!!!Yep it was that easy!!! I looked at the RRSP tax withdrawal rates that you pay when you want to take your money out. For all provinces except for Quebec you pay:
1)Amounts up to $5,000.00........10%
2)$5000.01 to $15,000.00..........20%
3)$15,000.01 and up.................30%
In my case I only lose $500.00 and walk away with $4,500.00 NET cash which can be used to buy a car, house, sailboat, furniture, or just about anything I want to buy.
As an added bonus, you get the bragging rights of telling your co-workers and friends you now make $5,000.00 more per year!!!! I love telling people what I make per year, and enjoy handing out photocopies of my bank statement!!! In summary, if you want to boost your income and feel great!!! take out $5,000.00 from your RRSP's, you'll be glad you did!!!!
March 25, 2009
That is an interesting loop-hole there you found if it does work and I assume you do not have to pay the $5000 back either.
Oh, wait a second (thinking)...
You get hit that 10% just by taking it out(?), but that $5000 gets ADDED to your yearly total income and thus is fully taxable. So if you made $90k a year, you would be taxed at 40ish% and thus you would pay $2000 out of the $5000 as tax.
Have a great day
I suspect that Roc has never been exposed to "employment income", so he probably isn't aware that you would have to claim the full $5000 as income on your next tax return and pay the balance of the taxes oweing next April. "You just keep thinking Roc... that's what you're good at!" (adapted from Butch Cassidy and the Sundance Kid)
If you withdraw money from your RRSP, you lose the effects of tax-free compounding from now on, since you can never re-contribute those funds (unlike a TFSA). The extra income could also put you in a higher tax bracket compared to the year you contributed those funds, meaning that you may have been better off not contributing to your RRSP in the first place.
But who cares about the boring details, when all that really matters is showing your artificially-inflated T1 to your co-workers, right?
(Note: There are reasons for prematurely withdrawing from your RRSP that aren't downright stupid. For example, it may make sense in a year when your income is unusually low. It may also make sense to withdraw before retirement as part of a strategy to reduce GIS, age tax credit, and OAS clawbacks. If you need money in an emergency, it may be more cost effective than taking out a loan.)