General information only — not financial advice for your situation.
This is a learning tool. Always check CRA My Account records and talk to a qualified professional for your own numbers.
Plain English
At high income, the government takes a bigger slice of every extra dollar you earn — about 43 cents. When you put money into an RRSP, you get all of that back as a refund. That's like getting a 43% instant return on your money. You should contribute enough to bring your income back down to the edge of the lower tax bracket, then invest the refund. Use your TFSA ($7,000/year) for any extra savings after the RRSP.
You earn $140,000 in Ontario. Contributing $22,955 to your RRSP (bringing taxable income down to $117,045) saves you approximately $9,873 in tax (43.41% combined rate on the income above $117,045). That $9,873 refund gets reinvested. Your TFSA gets the $7,000 annual max on top of that.
Show the analysis
The third federal bracket (26% on income from $117,045 to $181,440) combines with Ontario's 11.16% provincial rate plus the escalating surtax mechanism, producing combined marginal rates of approximately 43.41%. RRSP contributions at this rate generate substantial immediate liquidity via refunds. The optimal deployment strips income to the $117,045 boundary, capturing the full spread between the 43.41% deduction rate and an expected 20–30% retirement withdrawal rate — a 13–23 percentage-point positive arbitrage.
Income: $140,000 (Ontario). RRSP contribution to strip to $117,045: $22,955. Tax saved: $22,955 × 43.41% = $9,965. If retirement withdrawal rate is 29.65%: tax on $22,955 withdrawal = $6,806. Net lifetime gain: $9,965 − $6,806 = $3,159 per $22,955 contributed, plus decades of tax-sheltered compounding.
Edge cases
- If you have a defined benefit pension that will push retirement income above $117,045, the RRSP-to-RRIF conversion may occur at similar or higher rates — reducing or eliminating the arbitrage.
- Carry-forward RRSP room from lower-income years can be deployed now at the 43%+ rate for maximum value.
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About this site
Every number on this site is sourced from CRA publications, the Income Tax Act, or provincial fiscal releases. We show the math, cite the sources, and never tell you what to do with your money.