Viewing An RRSP As A Commercial Gimmick

March 5th, 2013 by

I thought this was interesting today as I was talking to some older people who were discussing how here in Canada we have what’s called an RRSP which is meant to help people save money for their retirement. Essentially, one of the main benefit to doing this is that contributing money into this plan allows you to deduct it from your overall income earned for the year which means you would pay less income tax. That means more money in your pocket in the present day. However, when it comes to retiring the money that you withdraw will still act as a taxable income. So therefore, a lot of your savings could end up going back to the government.

I was then hearing people say how they felt this was just a financial scheme from banks to get your money as to them it’s almost like boxing day or black Friday where they are expecting a surge of business. A point was then brought up where banks are obviously making money this way to offer it so with that alone it should make you think. Generally speaking, like anything I’m sure these types of plans can work well in various situations and in others it won’t.

The parts of the conversation that kind of got me thinking is the advertising behind these types of plans as they advertise it where it’s for everyone and that you must start saving now early. Just to over exaggerate though, if you were a low income earner where the income tax you pay is almost non existent then it makes more sense to use that money for things such as paying off any existing debt first. The money you save from having to pay any ridiculous interest fees is probably more beneficial.

Are things like this purely a commercial gimmick? Maybe there is some truth to it. While you should always consider saving money, even with plans like these where most parents would tell you to start doing it right away we should still think if it makes sense for our specific situations.


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