This concerns IRA in USA and RRSP in Canada. The options for contributing are tax-paid $$ for tax refund or pre-tax $$ for tax reduction (less tax withheld from pay). Technically the former is a tax shelter and the latter is income deferral. Providers promote only the refund option to create the opportunity for extra business from refunds being invested. They fail to disclose an extra hidden cost in that option.

This has finally come to light: Income providing savings is taxed, hence the refund. The tax benefit is based on the contribution and the extra income dedicated to tax is not recovered. Contributor pays residual cost of tax equal to the refund. This could be avoided by contributing income (pre-approval via form W4 in USA or T1213 in Canada).

It can presumed that the industry that provides both knows the difference between tax shelter and income deferral and that most contributors are not even aware of the terms. There is no fault with the account: only in the way it is marketed to providers' advantage at otherwise unnecessary cost to contributors. Failure to disclose? Misrepresentation of the alternative? Can contributor sue for recovery of costs?

Optional Information:
State/Country relating to question: Canada

Already Tried:
The industry does not even acknowledge my submissions