Canadian Wealth Secrets When to Fund the RRSP Over Using the Smith Maneuver - A Blueprint for Canadian Business Owners
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May 9, 2025 They debate whether to pull more salary, max RRSPs, or use the Smith Maneuver for Canadian business owners. They explain why taking extra salary to fund the Smith Maneuver can trigger high personal tax. They compare corporate retained earnings, RRSP room, and a re-advanceable credit strategy. They discuss keeping flexibility with RRSP room and diversifying between equities, cash-like assets, and permanent life insurance.
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Don't Withdraw Extra Salary To Force Smith Maneuver
- Avoid taking extra salary from your corporation solely to start the Smith Maneuver because you pay high personal tax upfront.
- Kyle Pearce explains an example: $10,000 withdrawn taxed at 40% leaves $6,000, producing only small tax-deductible interest benefits.
Small RRSP Funding Acts As Diversification
- Small RRSP contributions from a business owner can be a useful diversification between corporate and personal buckets.
- Kyle Pearce notes $30,000 RRSP vs $200,000 retained earnings is only ~15%, so keeping some outside the corporation adds flexibility.
Keep Some Retained Earnings In Your Company
- Keep some retained earnings inside the corporation instead of maxing RRSPs if those contributions would drain corporate capital.
- Kyle Pearce advises possibly splitting funds so growth inside the company remains available for strategic needs.