There is this thing that financial services industry does that irks me to no end.

Whenever they see an RSP Portfolio … and use this information in building a financial plan we use the balance at face value … and it is worth in fact … considerably less.

Canadians need to appreciate that RRSPs are FULLY TAXABLE.   Funds in an RRSP are funds that you have not yet paid tax on.   The tax is not saved.  It is deferred.    And the RRSP season is when the banks and fund companies really goes to town marketing RRSPs as the way to avoid taxes.    And who doesn’t want to do that right?

An RRSP portfolio with a statement balance of $250,000 is really worth somewhere between $125,000 and $200,000 depending on your tax bracket when you withdraw the money.    And it would be closer to the $125,000 if you had to take it all out now.  

Yes you can defer taxes in an RRPS for years, even decades, but eventually you are going to have to pay the piper.    

Scotia Bank is wrong.   You’re not richer than you think.    You can’t base your retirement plans with the assumption that 100% of your RRSP is yours to keep.    You own this asset jointly with CRA.

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