You can hear more and more people say that they don’t contribute to their RRSPs, thinking that it doesn’t make sense. If they ask my opinion, my response always depends on the persons circumstances.

It comes down to this: Will the person likely be in a higher tax bracket in retirement than they are today, the same bracket, or a lower one? Will their income likely to be higher or lower in the next five to ten years? How old are they? Are they married and a few more questions.

While it often makes sense for people with higher income to contribute significantly to RRSP’s, age and marital status have to be considered as well. When someone dies with a large RRSP or RRIF, their remaining RRSP or RRIF balance is fully taxable in the final year.

If your current income is $35,000, but you think that you might be making $50,000 or more in the next couple of years, putting any savings into a TFSA now, and wait to do the RSP contribution until you are making $50,000 could be a better option. This is the situation for many people early in their careers.

Then there is the opposite situation. If you think that you will be in a much lower tax bracket in the near future for whatever reason, you may want to put money in the RRSP now, and actually take it out in a year when your income will otherwise be very low. Many people do not realize that you can take funds out of your regular RRSP at any time and at any age. While you will be taxed on these withdrawals as income, if the tax rate is very low because you have little other income, it usually makes sense to withdraw the money in those years and put it back when your income is much higher.

There are many other situations, couples with a significant age difference for instance. Depending on the taxable income of each person and the ability to most effectively split income over the next number of years, a spousal RRSP could be a great solution. Larger age gaps can be quite valuable for RRSP investing. If the younger spouse has a spousal RRSP, and the older spouse still has RRSP room, the older spouse can contribute to the younger spouse’s spousal RSP. This can be done, even if they are older than 71, as long as the younger spouse is below that age. To take advantage of this scenario, maybe the older partner contributes for many years to the spousal RRSP, but has to stop three years before the younger spouse plans to withdraw the funds.

RRSP’s are a positive wealth management tool for many Canadians, there is a time to contribute, there is a time not to contribute and there is a time to withdraw funds. Each situation may create opportunities to maximize your long-term wealth. Choose wisely and get good advice.