Over the last few months during meetings with my clients and their investment advisors, some of the clients have been advised not to make further contributions to their RRSPs. I don’t understand the rationale for this advice.

The investment advisors are telling the clients they’ve built up large amounts in their RRSPs and when they’re forced to start withdrawing funds at age 71, the income will be taxed at the highest rate of tax.

When people make their RRSP contributions, they’re usually saving tax at a high tax rate. Once the funds are inside the RRSP, there’s no tax on the income until amounts are withdrawn. This means all the income can be tax sheltered until age 71. Once a person turns 71, the statutory amounts required to be withdrawn are relatively low. The remaining amount in the RRSP will continue to earn income on a tax deferred basis.

Given how long people are living, you could defer taxes on the income generated in the remaining RRSP for twenty to thirty years after you’ve turned 71. I’ve always told clients to maximize their RRSP contributions for as long as they can. I can’t see any reason to change that advice.