Can you have too much in RRSP?

[commie]

As part of your investment portfolio, can someone have too much % in the RRSP?
Here is my situation,

I have roughly 200K in my RRSP through self-directed account, invested in various equities and ETF's.
~30K in emergency funds in an ING account
~20K in investment account(equities,etf's)
maxed out the TFSA
mortgage of about 180K on a house valued at $400K

I am married, no kids yet...planning on kids in the next 1-3 years. My wife works for the gov't, has a
good DB pension, she has roughly 50K in RRSP. I have a cr8ppy DC pension with my firm, the firm contributes
4% of my salary into the DC, I do not put in anything.
I am still about 25-30 years away from retiring.

My question is, in future years, should I divert some of my annual RRSP contributions to other investment vehicle?
I have been maxing out my RRSP limit in the past.
Although, investing in the RRSP gives me good tax deductions. (i am in the top tax bracket)...

I just feel that I need more diversification from the RRSP. Would paying off the mortgage be a wiser choice?
My mortgage is currently a Fixed variable at prime -.85 which I still have 2 years left, signed in 2005.
That its so low right now, I can do better with the money in other investments.

[ray420]

As part of your investment portfolio, can someone have too much % in the RRSP?
Here is my situation,

I have roughly 200K in my RRSP through self-directed account, invested in various equities and ETF's.
~30K in emergency funds in an ING account
~20K in investment account(equities,etf's)
maxed out the TFSA
mortgage of about 180K on a house valued at $400K

I am married, no kids yet...planning on kids in the next 1-3 years. My wife works for the gov't, has a
good DB pension, she has roughly 50K in RRSP. I have a cr8ppy DC pension with my firm, the firm contributes
4% of my salary into the DC, I do not put in anything.
I am still about 25-30 years away from retiring.

My question is, in future years, should I divert some of my annual RRSP contributions to other investment vehicle?
I have been maxing out my RRSP limit in the past.
Although, investing in the RRSP gives me good tax deductions. (i am in the top tax bracket)...

I just feel that I need more diversification from the RRSP. Would paying off the mortgage be a wiser choice?
My mortgage is currently a Fixed variable at prime -.85 which I still have 2 years left, signed in 2005.
That its so low right now, I can do better with the money in other investments.

Good question here is my take on it. Since you are in the TOP TAX bracket maxing out RRSP is probably the best thing to do chances are at retirement you wont be in a higher tax bracket.

The problem you could have is that you may loss out on some government benefits when your RRSP turns in RRIF and your income is too high (thats not always a bad problem).

Mortgage: you seem to have most of it paid off depending on how you are currently paying your mortgage I might increase payments/make extra payments to pay it down a little faster but you do have a good rate on it from which i assume you will have a good rate in the future as well.
So it will come down to overal rate of return when you compared the interest you are paying on your mortgage vs return in your investments.

I would definitely max out the TFSA, as it wont count in the income test for government benefits.

Ones you have kids your situation will change and you'll have more expenses as well as RESP to plan for, but you do have $20K in non-reg portfolio which you can do a lot with such as a possible smith manoeuvre.

[AllWheelDrift]

Personally, I define "too much in RRSP" as so much in RRSPs that you will be taxed heavily when you withdraw and it is possible to reach that point.

You should calculate how much you expect to have in your RRSP based on your current contributions and how much you will withdraw per year (and what tax liability that will create.) Keep in mind once you convert to a RIF you are forced to withdraw a certain percentage each year.

I don't think that "diversification" is a good argument for investing outside of an RRSP when you have RRSP contribution room, since for the most part you can get good diversification inside an RRSP unless you have specific investments you can't invest inside an RRSP in mind.

In the highest tax bracket it probably makes sense to max RRSPs but like I said, I'd watch out for the tax consequences once you start withdrawing. Then again, it's not like your tax rate can be higher at retirement if you're aready in the top bracket. (One thing to consider is if maxing your contributions is knocking you out of the top bracket.)

[MrBurns]

My opinion is always pay your mortgage off ASAP.
As for having too much RRSP, if you change employers and get a great pension plan then it would be too much. As for now with your crappy pension plan and 25-30 years from retiring, it's ok.
By the way, without kids, you can retire in 20 years.

[commie]

I guess what i am trying to decide is if I can put the funds that I would normally put into my RRSP for better use elsewhere. Like investments, cottage, etc...

In the near future when the kids arrive(we are in our early 30's)...we would like to move to a bigger house. probably will add 200K to our mortgage..Which at our take home salary, should not make much of a dent in our budget.

I guess, diversification is not the right term for my concerns...More like flexibility. I will not be taking funds out of the RRSP for 25-30 years....yet to have such a large portion of my portfolio in it, i am not feeling comfortable.

If the funds were outside of the RRSP, then i can use it as I want..ie. use it to buy a bigger house, cottage, start business, etc...
But if my funds are in the RRSP, then its locked in.
and my RRSP portfolio has gotten to a sizable amount, that I can invest that over 20-25 years and it should still do quite well.

max'ing my RRSP does not put me into a lower tax bracket...just reduces the income.

[cloudycanada]

you can make spousal contribution to your wife's RRSP account, you get the tax deduction, she gets the money in her RRSP. You can achieve some income-splitting that way. If you can equalize what you and your wife will be getting in retirement, it will help you with taxes. But it depends on her DB pension, and your expected growth and withdrawal in your own RRSP

I don't think there is too much in RRSP, it looks like you are in the high tax bracket, so the deferral from RRSP contribution is significant, and even if you're still in high bracket after retirement, that 25 - 30 years of deferral is a lot.

I would suggest you to maximize your RRSP, unless there is an some big ticket items you need to save for in the near future (i.e. kids, upgrading to a bigger house). Such saving should be done through TFSA first, then through unregistered accounts.

Like you said, RRSP money is locked in, so some planning needs to be done. But you look like you are in a good financial situation, so contribute (to your own, or your spouse's RRSP) and reevaluate your plan after you have kids.