Is an RRSP a good investment for a 25 year old who doesn't need the tax break??

Question

I want to save for retirement but not sure where to start.

Answer 1

From the tax side of things ( I don't know much about investments to be honest ), you do not have to deduct the RRSP contribution in the year you purchased it. You can deduct it later against future income to reduce your taxes.

If you don't need the tax break, where are you getting money from to make the RRSP contribution in the first place.

What is your objective with an investment? To make quick money, or to save for retirement?

RRSP's generally require long term comitments in order to make money. I suggest you go to your local bank ( I went through TD and was very satisfied ) and ask what investment seems right for you. They can assess your risk level and suggest which types of RRSP investments you can make. Or just regular mutual funds work as well.

No matter how old you are, it is always good to start saving for the future.

Answer 2

Yes, it is a good idea to have an RRSP.  Other than the tax deductions to reduce one's taxable income and thus get the tax refund, an RRSP contribution allows one to have the income tax deferrred or sheltered within the RRSP.  In other words,the income earned within the RRSP is not taxable in the year until the money is withdrawn from the RRSP.  

If the investment return is 10% per yr, the investment will double every 7 yrs, and it will grow to 6 folds by the time you retire around mid 60 yrs old.  By then, taking the money out of the RRSP will be subject to a lower tax rate because your income after retirement will likely be lower.

You can set up your RRSP in a chartered bank, or brokerage houses inlcuding the low commission brokers like TD Waterhouse or Etrade Canada.  Then, use your RRSP contributions to buy any investments depending on your risk tolerance.   If you are risk averse, invest in GIC's or fixed income mutual funds.  If you are a risk taker, invest in stocks with your RRSP contributions.