# RRSP - why is it worth it?

Visibility: Public
asked Dec 15, 2018 07:36 PM by

Hello, I am thinking about opening an RRSP, but it seems like a risky investment to me. There is the TFSA, but let's say I maxed out my TFSA contribution. Even at that point, it seems an RRSP may not be worth it compared to a regular non-registered account, yet the RRSP is so popular and the more I think about it I don't understand why. Let me explain.

From my understanding, the advantage of an RRSP is that I can deduct the amount I contributed from my income on my taxes, which means I will get a big refund, especially if I am in a higher tax bracket. The disadvantage is that if I withdraw money before my retirement, I face penalties in that one, the amount I withdraw will be added to my income for that year on my tax form, making me pay more taxes at a higher bracket, and two, I will pay withholding taxes on that amount of up to 30%.

Hope that helps,

Jin