Forgive my ignorance but just wanting to learn how RRSP works. I have understand the basics but still unsure on a few things. I am a new immigrant and has not contributed on my RRSP. I understand that it is tax deferral system and would be hit by withholding tax when you take the money out before your retirement. What would happen if let's say after 10 yrs you want to move elsewhere or move back to your home country and would like to withdraw your money? If I am going to be hit by massive withholding tax, is there a benefit in contributing to RRSP as compared to investing in a non-registered accounts? Many thanks and would appreciate your comments.
depends on where you move, you should check if there is a treaty between your home country and Canada. it gets pretty technical might be worth the effort to seek an accountant or tax expert to answer that.
general info about rrsps
http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html
Withholding tax doesn't matter one bit. When you take money out of the RRSP you pay tax at your marginal tax rate, whatever it is at that time. Essentially money you put into your RRSP is money you would otherwise be earning and paying tax on that you are electing not to "earn" yet and put away into your RRSP to defer the taxes until later. When you take the money out of your RRSP (usually while retired) you pay the tax which you deferred in years earlier. Ideally you put money into your RRSP while you are earning high income and taxed at higher marginal tax rates, then you take money out while you have little or no income and pay taxes on that money at a lower rate than you otherwise would have.
If your plan is to move out of Canada in X number of years and withdraw the RRSP at that time, then there is no purpose in making RRSP contributions today. You'd be better off contributing that money to a TFSA instead (no tax deduction when you put the money in but no taxes when you take it out or while your investments grow).
More info is here
http://bevmoir.com/2005/11/28/leavin...-your-savings/
http://www.milliondollarjourney.com/...bout-rrsps.htm
http://blog.taxresource.ca/rrsps-and-leaving-canada/
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