Using the RRSP “Gross up” Strategy

This is a simple strategy to increase the size of your RRSP (Registered Retirement Savings Plan) without losing more of your income to savings.  The best way to explain the concept is with an example.  To keep the math simple we will say the tax rate is 50% (please note that there is no 50% tax rate in BC, the benefit of this strategy should be calculated at your real tax rate, however for the example 50% is much easier to visualize).

Example, John makes a $4,000 RRSP contribution at our imaginary 50% tax rate.  With this he can expect to save $2,000 on his income tax.  As many put there refund back into their RRSP, the gross up strategy says he should borrow the same amount as the refund and then use the refund to pay back the loan.  This increases the tax savings now and gets the money into your account sooner, giving your money longer to earn interest.  Now if you add a $4,000 contribution and $2,000 refund together and make that your new contribution you would now get $3,000 at our 50% rate, so we need to run through this a few times until the extra tax savings no longer makes much of a difference.


Normal RRSP contribution of $4,000 would create a $2,000 tax savings

Gross up RRSP contribution of $4,000 would become $8,000, with a refund of $4000 to pay off the $4,000 loan required to make the contribution.

To see if this strategy works for you can work out the difference at your tax bracket and hopefully with this strategy you can save a little more for retirement, without having to find any extra money.



This post has been kept general, to find out if an RRSP is right for you, and how to best use this tool to move forward you should discuss it with a professional.  Details can be found on the government of Canada website. This information is assumed correct, but is for information purposes only and it is up to the reader to verify it’s accuracy before acting on anything written on this site.


This website is focused on rules as they impact residence of British Columbia.  My business is focused on Greater Vancouver, Langley and Surrey and I am happy to discuss these options with people residing in this area.