By John J. Moakler Jr. BMath, CFP, CLU, CSC
President and Senior Executive Financial Planner
Moakler Wealth Management Inc.


For most Canadians, paying into the Canada Pension Plan (CPP) is a good deal.  But for self-employed individuals – like doctors – CPP is in fact a negative return on your money.  You will never get out of it what you put in.

Your accountant might say that you have to pay yourself a T4 salary, because that is the only way to create RRSP contribution room.  With respect, many accountants forget: if you pay yourself a T4 salary, you must contribute into CPP, and when you are an incorporated doctor, you are both employer and employee – and hence you will pay both portions, which averages out to approximately $5,000-$7,000 per year.  Let’s say you do that for 30 years; you would have contributed approximately 150,000 to $210,000.

Instead of contributing to CPP, what if we had invested that money ourselves, and it grows at a modest return of only 5% over 30 years?  It would be worth about $485,000 and we would be in total control of that bucket of money.  In 2019, the average Canadian is receiving approximately $12,000 per year in CPP payments, which is 100% taxable income, and we expect that amount to grow conservatively over time perhaps at a 2% rate.

If we compare this to our above example and we turned on CPP payments starting at age 65, how long will it take for you to withdraw everything you put in to your own bucket of money?  Almost 41 years. However, because our bucket of money is under our control, we could elect to take out more than that $12,000 per year.

Instead, what you want to do is take a T5 dividend as income – because when you pay yourself dividends you are exempt from paying into CPP.  Based on most doctors’ income levels, you will save between $5,000 and $7,000 annually. The Federal Government is talking about increasing the contribution levels into CPP and so it could increase to $8,000 to $10,000 annually, which only makes this argument even stronger that you should be paying yourself a T5 dividend as income.

If we instead contributed that $8,000 – $10,000 every year and put it into a TFSA. Now *you* are in control of that bucket of money in retirement.

And here’s the thing: most doctors don’t completely retire anyway.  They work two or three days a week, which is enough to keep them in the highest tax bracket – and then guess what?  When your RRSPs are automatically turned into RRIFs at age 71, you have to withdraw the money whether you want to or not, and because you are in the highest tax bracket, you will lose a full-on 50% of your RRIF payment to the tax man. 

It doesn’t have to be that way.  You can avoid the RRSP trap! 

Want to talk about it?  Reach out to me anytime.


John J. Moakler Jr. BMath, CFP, CLU, CSC
President and Senior Executive Financial Planner
Moakler Wealth Management Inc.
1 416 840 8544