Why would anyone accept half earning nothing?

Because the corporate deduction is immediate at ~11–27% corporate rates and payouts land at your retirement rate. When the personal-rate differential is large, it can outrun the RTA drag — the modeller shows exactly when.

How is an RCA different from an IPP?

An IPP is a registered pension: capped, actuarially disciplined, creditor-protected, tax-sheltered growth. The RCA is the unregistered overflow: unlimited in principle, half-parked with CRA, more flexible on payout. Many owners layer RCA on top of a maxed IPP.

What happens at death?

The RCA trust’s assets (and remaining RTA refunds) flow per the plan terms — estate treatment needs specific advice; it does not enjoy the CDA machinery insurance does.

RCA Modeller

The 50/50 split, the zero-interest refundable tax account, and when a Retirement Compensation Arrangement beats a bonus.

★ CHAPTER BRIEF

An RCA lets the corporation deduct large retirement funding beyond IPP limits — with a catch the book refuses to hide: half of every contribution sits with the CRA at zero interest (the RTA), refunded $1 for every $2 paid out in retirement. The structure wins on the rate differential between your top rate today and your retirement rate — if that differential survives the RTA drag.

Elena, the book’s cardiologist, uses an RCA to move pre-sale income at 53.53% into retirement years at ~35%. The corporate deduction is immediate and unlimited by RRSP-style caps — but s.67 reasonableness applies: contributions must be defensible against service and earnings.

This modeller shows the two accounts building side by side, quantifies the RTA’s forgone growth honestly, then compares the after-tax retirement outcome against the boring alternative: bonus now, pay top rate, invest personally. On many inputs the bonus wins — that is the point of modelling before committing.

★ KEY POINT

The RCA is a rate-arbitrage machine with a built-in brake. Big rate differential + short accumulation window (late career, pre-sale) = the profile where it shines.

⚠ CAUTION

RCAs attract CRA attention when used as disguised salary deferral or funded unreasonably. Design, funding, and payout schedules need an actuary and tax counsel — the figures here are illustrative, not promised.

Your numbers

Annual contribution

Contribution years10

Trust return5%

Planned retirement payout / year

Your marginal rate today54%

Expected rate in retirement35%

The rate differential is the whole engine — and the RTA is the brake.

RCA route, total after-tax retirement income

$856,256+$327,833 vs bonus now

Each $100,000 contribution is fully deductible to the corporation, then splits in half: $50,000 invested in the RCA trust, $50,000 parked with the CRA at zero interest. That refundable account is the structure’s honest price — about $160,339 of forgone growth over 10 years. In retirement, every $150,000 paid out triggers a $75,000 refund, and you pay tax at your then-rate of 35% instead of today’s 53.53%. Net of everything, the RCA route delivers about $856,256 after tax versus $528,423 for bonus-now-invest-personally — an advantage of $327,833. The rate differential does the work; the RTA does the damage.

⚠ Contributions must be reasonable (s.67); design requires an actuary and tax counsel.

Metric	RCA	Bonus now
Deduction timing	corporate, immediate	corporate, immediate
Personal tax	35% in retirement	53.53% today
Structural drag	RTA earns 0% (−$160,339)	annual tax on personal returns
After-tax total	$856,256	$528,423

Figures as of July 2026 · Ontario basis · Educational illustration, not advice — confirm current rates with your CPA.

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Questions to ask your advisor

Ask your Actuary

What contribution level is defensible for my service and earnings history under s.67?

Ask your CPA

Model my expected retirement bracket honestly — does the differential survive the RTA drag on my numbers?

Ask your Tax counsel

Letter-of-wishes, trustee choice, investment policy — who papers the RCA trust properly?

Continue in book order

From Chapter 6IPP vs RRSP From Chapter 13GIC vs Prescribed vs Insured Annuity

Educational illustration, not advice. This tool is provided for educational purposes only and does not constitute financial, tax, legal, accounting, or insurance advice. Results are estimates, not promises — hypothetical illustrations are projections only. Figures use Ontario rates as of the date stamped above; rates and limits change. Confirm current figures and your specific situation with a CPA, tax lawyer, and licensed insurance advisor before acting.