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Today, February 29, 2012, is the deadline for contributing to an RRSP for the 2011 tax year. Are you rushing out to dump as much money as you can into an RRSP account in order to reduce or eliminate owed taxes? Before you do, consider my last pieces of "financial sacrilege" for the year regarding the issue.

How much do you need to contribute, in order to push you into the lower tax bracket? And is it worth it? Consider how much you need to contribute, versus how much taxes you will be actually saving. It needs to make sense.

My overall perspective and qualms on RRSPs is that it isn't an issue of reducing taxes. Its really all about CONTROL of your own money. "Registered" programs such as the RRSP is really government control over your money.

Make no mistake, they COMPLETELY dictate the terms of when, and how much of your money you will get back when you ask for it in the future. They can change or impose new rules on a wide range of policies including income brackets, tax rates, withdrawal fees, clawbacks, etc.

Think of RRSPs as placing your money in someone else's wallet (who is known to have a spending problem). They claim they will keep it safe for you until you get old (implied, but no specific age given or put down in writing). The more you give them to hold for you, the less taxes you pay them for the year (nowhere near close to a 1-for-1 basis though). They keep pushing very hard inorder to get you to keep your money "safe" with them, spending lots of money on gimmicks, incentives, gifts, etc. But they never tell you to look at your tax situation, and that its best to give them as much money has you possibly can. They give a vague and general explanation of how it works, claiming when you are old you should have less income and they'll give you tax breaks when you want take it out. They are doing it for everyone else, and "update" their terms every year.

They haven't determined exactly what the terms will be for you yet in the future, and says with a wide grin ....
"Don't worry, we can talk about that when time comes"

Don't forget that my RRSP thoughts have labeled me a financial & investment "heretic" that must be burned at the cross! This is partially why you'll likely never see any of my articles featured in a national newspaper or recommended by financial professionals. =P

Over the years I have contributed very little in terms of RRSPs. I always look at my tax situation first, in order to make the most effective use of RRSP contributions, putting in as little as I can so that I can save and invest outside "registered" programs.

Thanks & Happy Investing!