Get your personalized RRSP Meltdown illustration
This strategy calculator is used by Pankaj Bhatia, PFA, CHS to prepare personalized client illustrations. It models your RRSP balance, monthly withdrawals and withholding tax, the investment-loan interest, flat or year-by-year returns, the year-end tax adjustment and loan repayment, and compares three strategies side by side with a year-by-year PDF report.
Please contact Pankaj Bhatia for an illustration with your own numbers.
$100,000 RRSP, $1,500 a month withdrawn, $300,000 investment loan, over 10 years
The RRSP pays out $1,500 a month. After 10% withholding, $1,350 is deposited, which covers the $1,300 monthly interest on a $300,000 loan at 5.20%. The example uses a 40% average tax rate, a 50% capital-gains inclusion rate, a deductible investment-loan interest assumption, and the same return in the RRSP and the investment. "Keep the RRSP" assumes it is later withdrawn over 10 years at a 25% average tax rate. The meltdown value is after repaying the full $300,000 loan and estimated capital-gains tax.
| Annual return | 1. Keep the RRSP | 2. RRSP meltdown + loan | 3. Withdraw RRSP today |
|---|---|---|---|
| 5% | $122,167 | $127,486 | $90,187 |
| 8% | $161,919 | $263,163 | $115,628 |
| 10% | $194,531 | $374,843 | $136,500 |
Estimated after-tax value at the end of 10 years. In this example the RRSP is fully withdrawn before year 10, after which the client pays the loan interest from regular cash flow: about $42,418 in total at 8%, which is already subtracted from the meltdown value. Withdrawing the RRSP today leaves $60,000 to invest after 40% tax. Returns are hypothetical and not guaranteed; returns below the borrowing cost, or negative years, can make the meltdown the weakest option. This is an educational example, not a forecast or recommendation.
Understanding the strategy
What the calculator is showing—and what it is not.
RRSP withholding is not final tax
A $1,500 withdrawal with 10% withholding deposits $1,350. The $150 sent to CRA is a tax prepayment. Final tax is determined on the client’s tax return.
Interest deduction is separate
Eligible investment-loan interest may reduce taxable income. The calculator shows the RRSP income and estimated interest deduction separately rather than saying they automatically cancel.
The loan is fully repaid
The meltdown result subtracts the outstanding investment loan before showing after-tax investment equity. The remaining RRSP is disclosed outside the headline strategy value.
Frequently asked questions
Plain-language answers about the RRSP meltdown strategy.
What is an RRSP meltdown strategy?
An RRSP meltdown uses regular, controlled RRSP withdrawals to help pay the interest on an investment loan. The borrowed money is invested in a non-registered account. The aim is to compare what may remain after the loan is repaid and estimated taxes are deducted against simply keeping the RRSP or withdrawing it all today.
Can I run the RRSP meltdown calculator myself?
The calculator is used by Pankaj Bhatia, PFA, CHS to prepare personalized client illustrations. Contact him by phone, WhatsApp or email for an illustration using your own RRSP balance, withdrawal amount, loan and tax assumptions.
Why does the calculator show additional cash contributed?
It appears only when the net RRSP deposit is less than the monthly loan-interest payment. For example, if $1,350 is deposited and interest is $1,400, the client contributes the $50 monthly difference. The calculator totals those monthly shortfalls over the selected period.
Is the remaining RRSP included in the meltdown result?
No. The headline meltdown value includes after-tax investment equity, unused RRSP cash after interest and additional cash contributed. The remaining RRSP is shown separately with an asterisk so the client and advisor can decide how to handle it.
Where does capital-gains tax come from?
The estimate applies only to growth above the investment’s assumed cost base. It does not apply to the investment-loan principal. The model assumes the investment is sold at the end of the projection.
Does the calculator guarantee that borrowing to invest will work?
No. Returns may be lower or negative, interest rates may rise, tax treatment may differ and the loan remains repayable. This is an educational comparison, not a recommendation.
Can the projection period be customized?
Yes. A personalized illustration can use any whole number of years from 1 to 40, including 11, 12 or 17 years.
Review your RRSP strategy with Pankaj Bhatia
Every client’s income, tax position, investment objective and borrowing capacity is different. A personalized review can test whether the withdrawal amount, leverage level and projection period are appropriate.
Cell: 647-640-2222 Office: 905-624-2244
Email: info@pankajbhatia.ca
Important information
This calculator is an educational illustration only. RRSP withholding tax is a prepayment and is not necessarily the final tax. The editable average tax rate is a simplified planning assumption applied to the full RRSP balance and the taxable portion of investment gains. Actual tax depends on total income, deductions, province, credits, benefits and individual circumstances.
Borrowing to invest can magnify gains and losses. Investment returns are not guaranteed, interest rates may change and the loan remains repayable.