TFSA and RRSP

[Vmack]

So I'm at that point where I need to start taking my future more seriously and put money away for future education/retirement/rainy days/buying a home one day.

I've been reading up on and trying to do my research on how to effectively manage TFSA & RRSP savings and investments. Wondering if anyone here has any articles or anything that are good reads so I can do some homework and figure out how to utilize each one.

All help is appreciated

[DeleriousZ]

If you're planning on using the savings for a home purchase, be sure to take advantage of the home buyer's tax stuff on RRSP's. The first 20k? Is 'tax free' to deduct from your RRSP when used for the purchase of your first house.

[CapnCrunch]

I think a very general rule is if your tax rate is 65-70K or more use RRSP, if you're under use the TFSA.

[Mckenzie]

Use TFSA first. Every penny of your savings should go into that account up to the cumulative annual limit. After that, determine your spending needs and apportion the split between an unregistered account and RRSP. I dont think that putting money into an RRSP for a tax refund is a well thought out strategy, especially since it is locked in. The TFSA is great because everything inside it grows tax free and you can take it out whenever you need it. Personally I put anything with yield inside the TFSA and RRSP. Other than those, I will pay down mortgage or other personal debt with savings since they are risk free, after-tax returns.

[woodywoodford]

Delerious - isn't the home buyers plan 25,000? (I could be wrong)

Young You:
- Max out the TFSA. The compounded return in that account is 100% tax free, so it makes the most sense to have your investments in there for as long as possible. (TFSA taxes the principal, RRSP taxes the principal plus capital gains/dividends)

Old You (ideally):
- You've now acquired 40 years of RRSP contribution room. You've made 10% every year on your TFSA and that accounts ballin', and what you see is completely yours (if it was an RRSP account, that money would be significantly taxable). But your salary is now $250,000. So you use those years of RRSP room to bring yourself down to, say, the 60,000 in taxable income. You successfully keep all of your investment income, and make huge tax savings at the same time.

Old You (wrong):
- You put all that money into your RRSP. Now entering retirement, you lose 40% of those returns when you withdraw because you didn't use the TFSA perk. And you also claimed your RRSP contributions every year since you finished school, so you ALSO have to pay full tax on your $250,000 salary. The result is your retirement savings are cut in half (or whatever).

The only real reason for a young guy to contribute to RRSP is for the home buyers plan or if their employer offers some incentive (contribution matching, etc). You might be able to delay claiming contributions, but I'm not sure for how long. And that misses the TFSA perk.

Disclaimer: good luck getting 10% consistently

[Kloubek]

Ok- I'm sure there is a simple answer here but I'm oblivious and would like to hear it.

You guys are suggesting to max our TFSA's first, then RRSPs as a secondary investment. I do understand that interest in TFSA is non taxable. (Though I actually thought RRSP income was as well)

However, when you put into TFSAs, you're not getting the money back on your taxes like you do with RRSPs. And yes, I understand you might get taxed on the RRSPs when you take them out, but there's some 12-14k you can make without being taxed so as long as you stay below that once you hit retirement, isn't that the better choice?

[Mckenzie]

^Yes RRSP income is tax free as is TFSA. However, you eliminate the ability to use the RRSP unless you want to pay hefty taxes on it in the case of emergency or if you just want to have cash to put towards another use. The TFSA gives you that flexibility of being able to access it when you need it. As for RrSP contributions, I don't see the point in spending $25k to get $10k back on tax return (assuming 39% rate). You have locked up the $25k in RRSP and cannot access it unless you pay that tax back on withdrawal.

Realistically, its only $5k a year we are talking about into TFSA, so the first $5k ideally should go there and then put into RRSP as available. Personally, if there is a personal debt of anything more than 4%, I would pay that off. 4% after tax is 6.6% before tax RISK FREE. Good luck finding anything in the market that has a risk free return of 6.6%. Fixed income cannot even come close to that unless you are going high yield bonds. Equity securities can return much more obviously but the risk/return profile is much different.

[DeleriousZ]

Originally posted by woodywoodford
Delerious - isn't the home buyers plan 25,000? (I could be wrong)

It could be, but last I checked it was 20k. There was also a 5k tax credit IIRC.

[liquid1010]

Originally posted by Mckenzie
^Yes RRSP income is tax free as is TFSA. However, you eliminate the ability to use the RRSP unless you want to pay hefty taxes on it in the case of emergency or if you just want to have cash to put towards another use. The TFSA gives you that flexibility of being able to access it when you need it. As for RrSP contributions, I don't see the point in spending $25k to get $10k back on tax return (assuming 39% rate). You have locked up the $25k in RRSP and cannot access it unless you pay that tax back on withdrawal.

Realistically, its only $5k a year we are talking about into TFSA, so the first $5k ideally should go there and then put into RRSP as available. Personally, if there is a personal debt of anything more than 4%, I would pay that off. 4% after tax is 6.6% before tax RISK FREE. Good luck finding anything in the market that has a risk free return of 6.6%. Fixed income cannot even come close to that unless you are going high yield bonds. Equity securities can return much more obviously but the risk/return profile is much different.

This - enough said (especially with regards to the personal debt). :werd:

My only change would be that I tend to split between my RRSP and TFSA.

[codetrap]

Alternatively, you could contribute to your RRSP, get a nice healthy refund, and use that to fill your TSFA. That's the route I go. Best of both worlds really.

[Vmack]

Thanks guys. I see alot of good info. I guess everyone has their own way, ill see about getting started and try finding more info as i go

[Kloubek]

Still confused. And perhaps it is due to my perception on how taxation works in the first place. Perhaps I've made an assumption or been told misinformation.

I understand that if one pulls the RRSP out early they're getting it up the ass with tax. No doubt. My my intentions of investing in an RRSP is to never take it out until required. I have enough of a safety net that I don't need to have my RRSP money accessible any time soon.

And when it does come time to retire, provided you do not take out more than your annual tax credit amount based on the province you're in, aren't you exempt from being re-taxed on that amount? So in Alberta last year or perhaps the year before it was $17,XXX. Can't I take that out and am only taxed on the amount after that? And if that is the case, then why not get the 40% back when investing right now? You don't get that with TSFAs.

I'm gonna invest regardless because my company contributes along with me. But even if they didn't, I'm still inclined to think the only advantage of maxing out TSFAs is that you have access to that money whenever you need it.

[Xtrema]

Originally posted by Kloubek
Still confused. And perhaps it is due to my perception on how taxation works in the first place. Perhaps I've made an assumption or been told misinformation.

I understand that if one pulls the RRSP out early they're getting it up the ass with tax. No doubt. My my intentions of investing in an RRSP is to never take it out until required. I have enough of a safety net that I don't need to have my RRSP money accessible any time soon.

I'm gonna invest regardless because my company contributes along with me. But even if they didn't, I'm still inclined to think the only advantage of maxing out TSFAs is that you have access to that money whenever you need it.

In short:

RRSP:

- tax refund when you buy into it.
- grows tax free as long as under shelter
- pay tax when you withdraw, withdrawal treat as income and subjected to income tax.

TFSA:

- no tax refund when you buy into it.
- grows tax free as long as under shelter
- no taxes when you withdraw


Originally posted by woodywoodford
The only real reason for a young guy to contribute to RRSP is for the home buyers plan or if their employer offers some incentive (contribution matching, etc). You might be able to delay claiming contributions, but I'm not sure for how long. And that misses the TFSA perk.

That's pretty much it. But instead of young and old, I would say income tax bracket. (Really, a lot of kids out of school are now starting in the $60-$70K/year range).

If you are making more than $44K a year and in Alberta, a portion of income will be taxed at a minimum of 32%. So for every $10 of RRSP you buy, you are getting at least $3 back as tax refund.

Tell me another investment that we net you instant 30% return?

Take your return and go buy TFSA.

Yes, there is always the idea of saving your contribution later and save 39% instead of 32% and on bigger portion of income. But just think of the tax free growth in that time while(if) you get to the top bracket. Remember, the bracket is a moving target, this year it's >$135K for top bracket federally.


The way I would choose these vehicles is basically affordability. If I can afford to lock it away, RRSP. If I need rainy day funds, TFSA.




And when it does come time to retire, provided you do not take out more than your annual tax credit amount based on the province you're in, aren't you exempt from being re-taxed on that amount? So in Alberta last year or perhaps the year before it was $17,XXX. Can't I take that out and am only taxed on the amount after that? And if that is the case, then why not get the 40% back when investing right now? You don't get that with TSFAs.


Yes. the idea is withdraw minimum possible when you have no income to minimize tax grab.

But here's the problem with RRSP, RRSP over-contribution. You are forced to turn RRSP into RRIF when you hit 71. @ 72 you are forced to take out 7.5%. If you have 1M, that's $75K of income and a lot of that will fall on the higher tax bracket.

So when you reached over-contribution point, stop. And if you are over by a lot, you should look at retiring early and spend it on yourself and slowly get money out and put it toward TFSA. IMHO, you should review your RRSP by 50 to make sure you are not over-contributing to avoid forced, heavy taxes by 72.

There is no point having money when you are old.

[msommers]

If you're not putting in a lot when you're at the top tax bracket to be able to bump down, is it even worthwhile?

[Xtrema]

Originally posted by msommers
If you're not putting in a lot when you're at the top tax bracket to be able to bump down, is it even worthwhile?

Minimum of $3 return on $10 investment.

You do the math if its worth it or not.

[sabad66]

Generally you would want to put your riskiest investments into TFSA because if you hit it big then you will be laughing.

If you don't own a house yet, I would put 25k into RRSP (to eventually be used towards a house DP via the Home Buyer's Plan) and then anything after that into TFSA. Note that you have to pay yourself back this 25k over 15 years, but you will get a minimum 7500 back in tax refund for contributing (25k*0.3) so it shouldn't be too bad.

The most important thing to understand about RRSPs is that it is essentially just a way to defer taxes. The idea is that you have less income when you are retired so you will be taxed at a lower rate.

For example:
150k income today, the 15k from 135 to 150 is taxed at 39% (5850 taxes for that 15k). but if you put that 15k into an RRSP you basically only made 135k for the year and will get the taxes back on that 15k (so an extra 5850 on your tax refund). when you are retired, the idea is that you won't have a paycheque any more so when you pull that 15k out again, you will be at a much lower tax bracket.

that said, you have to predict what your lifestyle will be like when you are retired. if you want to toys / trips / baller lifestyle then you probably won't be good with such a low income and you're essentially just going to pay the same amount of taxes in the future. so ideally you will want a combination of other retirement income (like TFSA) to supplement the taxable amount you would be pulling from your rrsp.

[90_Shelby]

What is the stance on investing in RRSP/TFSA vs paying off ones house asap?

In my mind, interest rates are low therefore I want to pay off the house as soon as possible to decrease the amount I give the bank in interest. Thoughts?

[93VR6]

Originally posted by 90_Shelby
What is the stance on investing in RRSP/TFSA vs paying off ones house asap?

In my mind, interest rates are low therefore I want to pay off the house as soon as possible to decrease the amount I give the bank in interest. Thoughts?

If you can make more than your mortgage interest rate on your investments than the money is better spent investing. I do like the idea of being payment free though and you worry less about your investments, if it were me I'd probably put the extra $$ in a stock that pays dividends that are > your mortgage rate.

[Xtrema]

Originally posted by 90_Shelby
What is the stance on investing in RRSP/TFSA vs paying off ones house asap?

In my mind, interest rates are low therefore I want to pay off the house as soon as possible to decrease the amount I give the bank in interest. Thoughts?

Amortized debt on primary residence is costly. You should try to pay that down first. There is nothing that will generate thousands per month like you lose to amortized interest. And if you have the principle to make thousands per month, your house would be paid off.

Paid off your house and then get heloc to catch up on rrsp/tfsa. Heloc is way cheaper than mortgage.

[e36bmw///]

nm

[e36bmw///]

nm

[Vmack]

Originally posted by codetrap
Alternatively, you could contribute to your RRSP, get a nice healthy refund, and use that to fill your TSFA. That's the route I go. Best of both worlds really.
this sounds like a solid idea, I think I'll probably try going this route.

I'm really curious about the home buyers plan as that is something I seriously want to work towards and owning in 3-4 years from now, or hopefully not much later than that

[e36bmw///]

nm

[DeleriousZ]

Originally posted by Vmack
I'm really curious about the home buyers plan as that is something I seriously want to work towards and owning in 3-4 years from now, or hopefully not much later than that

Home Buyer's Plan.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

So not totally tax free, it appears you can't just drain the account then close it and not see any repercussions.

First time home buyer's tax credit:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns360-390/369/menu-eng.html

Probably not discussed on here too much because all of the beyond ballers already have 4 or 5 houses ;)

[Vmack]

Originally posted by DeleriousZ


Home Buyer's Plan.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

So not totally tax free, it appears you can't just drain the account then close it and not see any repercussions.

First time home buyer's tax credit:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns360-390/369/menu-eng.html

Probably not discussed on here too much because all of the beyond ballers already have 4 or 5 houses ;)
lol when i finish up school I'll have to work my ass off to catch up to all you guys

[tenth]

Originally posted by Xtrema
[B]That's pretty much it. But instead of young and old, I would say income tax bracket. (Really, a lot of kids out of school are now starting in the $60-$70K/year range).

If you are making more than $44K a year and in Alberta, a portion of income will be taxed at a minimum of 32%. So for every $10 of RRSP you buy, you are getting at least $3 back as tax refund.

Tell me another investment that we net you instant 30% return?

Take your return and go buy TFSA.

Yes, there is always the idea of saving your contribution later and save 39% instead of 32% and on bigger portion of income. But just think of the tax free growth in that time while(if) you get to the top bracket. Remember, the bracket is a moving target, this year it's >$135K for top bracket federally.


The way I would choose these vehicles is basically affordability. If I can afford to lock it away, RRSP. If I need rainy day funds, TFSA.
Absolutely agree. The benefit of rolling over your rrsp contributions on the gross basis will exceed after-tax returns on TFSA contributions on a long-term basis (20+ years), and you can control to a degree the tax rate you do end up paying on your RRSP income.

Flexibility would be the reason to throw it in the TFSA first, although for truly retirement savings you probably shouldn't put it in more flexible accounts if you'd be tempted to spend/waste it.

[davidI]

Originally posted by DeleriousZ


Home Buyer's Plan.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

So not totally tax free, it appears you can't just drain the account then close it and not see any repercussions.

First time home buyer's tax credit:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns360-390/369/menu-eng.html

Probably not discussed on here too much because all of the beyond ballers already have 4 or 5 houses ;)

I did this when I moved back to Canada. I was making more internationally than I was going to in Canada so I maxed out my RRSP, then withdrew it once I got back to Canada to put into my house. My thought was that I'd re-pay the funds into the RRSP when I was in a lower tax bracket and would therefore save some coin. Great in theory, but after a year in Canada I decided the domestic life wasn't for me so I didn't save any money, and now need to deal with the hassles of paying it all off before I go non-resident!

In the end, it doesn't make a lot of sense to do unless you already have a lot of money in your RRSP that has grown tax free and you need that money to make your down payment. Otherwise, it makes just as much sense to save your contribution room for when you'll be in a higher tax bracket and pay the downpayment using your after tax income.

[CapnCrunch]

The main thing you should look at is you retirement income.

If you make 80,000 now and want to retire on 60,000, then get rrsps.

If you make 80,000 now and want to retire on 100,000, then use the tfsa.

[davidI]

Originally posted by CapnCrunch
The main thing you should look at is you retirement income.

If you make 80,000 now and want to retire on 60,000, then get rrsps.

If you make 80,000 now and want to retire on 100,000, then use the tfsa.

:confused:

[Vmack]

Originally posted by CapnCrunch
The main thing you should look at is you retirement income.

If you make 80,000 now and want to retire on 60,000, then get rrsps.

If you make 80,000 now and want to retire on 100,000, then use the tfsa.
okay.... now i'm lost

[Xtrema]

Originally posted by Vmack

okay.... now i'm lost

I think that's his way of saying tax defer vs tax free.

You will both end up with $100 but TFSA you pay no taxes and RRSP you do, hence $60.

Unfortunately, that's overly simplified. Right now you can have 4x as much yearly limit on RRSP (22K on $122K income) than TFSA (5.5K). Given you max out both, the only way you have more TFSA than RRSP is your risky bet with TFSA pays off and quadruple your money.

I won't worry about the tax implication until you are closer to 50 and have to think about withdrawal.

The key is can you afford to lock it away or not. That's the indicator on RRSP or TFSA.

TFSA, you can take out at any time with no tax implications. RRSP you can only take it out when you have no other income to lessen tax implications.

There is a lot of variables when planning this and if you are just out of school, I won't expect you to understand every aspect right from the start. 1st you need to get a job, once you have income, you have to get budgeting down to see how much you are spending and saving. Then decide on the big ticket item like a house (huge expense) before you know how much you have left over for these saving plans.

For example, if you are just out of school, I think you can apply at least the last 2 years of tuition + living allowance and such to lower your tax bracket. This make RRSP is much less beneficial as a tax reduction vehicle. Also are you graduating with student loan debt? I think there are some tax benefit on servicing that debt as well (don't quote me on that, last time I checked on that is 15+ years ago).

Talk to a financial planner and give them the full picture. Everyone's situation is different.

[Vmack]

Originally posted by Xtrema


There is a lot of variables when planning this and if you are just out of school, I won't expect you to understand every aspect right from the start. 1st you need to get a job, once you have income, you have to get budgeting down to see how much you are spending and saving. Then decide on the big ticket item like a house (huge expense) before you know how much you have left over for these saving plans.

For example, if you are just out of school, I think you can apply at least the last 2 years of tuition + living allowance and such to lower your tax bracket. This make RRSP is much less beneficial as a tax reduction vehicle. Also are you graduating with student loan debt? I think there are some tax benefit on servicing that debt as well (don't quote me on that, last time I checked on that is 15+ years ago).

Talk to a financial planner and give them the full picture. Everyone's situation is different.

Thanks, I'm def going to sit down with an advisor soon. I'm actually looking to go back to school right now, either in calgary or lethbridge, (currently living in winnipeg), so I expect that with working part time, I'm probably looking at between 20-30k in debt. Obviously that will have a huge impact on how much I have for contributing and on my tax bracket. Should be done and working within 2 years or so provided I get in this year.

Really stressful trying to figure out this stuff while not being done school and not sure of what I'll be making when I start. (planning to do accounting, get a CGA, then CA.

Just trying to plan ahead...:banghead:

[msommers]

Assuming housing prices don't plummet over my lifetime...

Lets assume I have 25K into my RRSP for a first-time home buyer. I've bought a home. Now I'm paying interest on that mortgage. Unless I'm getting RRSP matching and/or being lowered a tax bracket, would it make more sense to put future RRSP money against the mortgage to pay it off faster?

[tenth]

Originally posted by CapnCrunch
The main thing you should look at is you retirement income.

If you make 80,000 now and want to retire on 60,000, then get rrsps.

If you make 80,000 now and want to retire on 100,000, then use the tfsa.
How does this analysis factor in that TFSA contributions are on present day after tax income? Looks like you're just applying the roughly top AB tax rate to $100k, but that would be wrong.


Originally posted by Vmack
(planning to do accounting, get a CGA, then CA.)
There's no benefit to 2 Canadian accounting designations, but regardless if you're 2 years out we'll all be CPA's by the time you qualify.

[Xtrema]

Originally posted by Vmack
Just trying to plan ahead...:banghead:

That's good. But from where I'm looking, you'll be at least 3-4 years out before you have to worry about RRSP. Since A) you don't have much income yet to create contribution room and B) you still have debt to service and C) you still got tons of tuition tax credit to cover at least first year of full time employment income.

But if you do have a few bucks left over right now, put it in TFSA. Since your student loan interest doesn't kick in til schooling is over (or 6 months after school is over?)

So it's great for you to make gains tax free while you have a free loan. But I know it's tough to save $ as a student.

[Vmack]

Originally posted by tenth




There's no benefit to 2 Canadian accounting designations, but regardless if you're 2 years out we'll all be CPA's by the time you qualify.
wouldn't I be able to do that if I'm graduating in a few years? or am I not understanding your point?

[Vmack]

Originally posted by Xtrema


That's good. But from where I'm looking, you'll be at least 3-4 years out before you have to worry about RRSP. Since A) you don't have much income yet to create contribution room and B) you still have debt to service and C) you still got tons of tuition tax credit to cover at least first year of full time employment income.

But if you do have a few bucks left over right now, put it in TFSA. Since your student loan interest doesn't kick in til schooling is over (or 6 months after school is over?)

So it's great for you to make gains tax free while you have a free loan. But I know it's tough to save $ as a student.

Yeah for sure. I most likely wont start til I'm done school and working, just want to get the best understanding of everything now so I'm not running around like a chicken with its head cut off when the time comes.

[Xtrema]

Originally posted by Vmack

whats a CPA? cert public accountant? :dunno:

http://cpacanada.ca

[Vmack]

Originally posted by Xtrema


http://cpacanada.ca
how would that effect my schooling? would it at all? Or would I just be looking to get a CPA designation after grad instead of the others?
a little off topic, but if it concerns my future I wanna know about it lol

[Xtrema]

Originally posted by Vmack

how would that effect my schooling? would it at all? Or would I just be looking to get a CPA designation after grad instead of the others?
a little off topic, but if it concerns my future I wanna know about it lol

I got nothing to add here. You need to talk to your peers and instructors. But if you are in standard post secondary school programs, it shouldn't affect you. Just a new certification path and title once they have ratified everything.

I think it's a bigger deal for current CGAs and CMAs.

[Vmack]

Originally posted by Xtrema


I got nothing to add here. You need to talk to your peers and instructors. But if you are in standard post secondary school programs, it shouldn't affect you. Just a new certification path and title once they have ratified everything.

I think it's a bigger deal for current CGAs and CMAs.
thats what I gathered in reading through the website. Shouldn't effect me, at least I hope it wont

[CapnCrunch]

Originally posted by tenth

How does this analysis factor in that TFSA contributions are on present day after tax income? Looks like you're just applying the roughly top AB tax rate to $100k, but that would be wrong.


There's no benefit to 2 Canadian accounting designations, but regardless if you're 2 years out we'll all be CPA's by the time you qualify.

I'm just generalizing here. My point is it doesn't make a lot of sense to pay into an rrsp when your in a low tax bracket, and then take it out later when you retire if you are saving to be in a higher tax bracket.

Like it's been mentioned, there are so many other variables to consider.

But in my opinion, someone fresh out school, making a low-ish salary, and not saving more than $5000 a year should use a TFSA. Once your income increases (higher tax bracket), switch to RRSP's.

[Xtrema]

Originally posted by msommers
Assuming housing prices don't plummet over my lifetime...

Lets assume I have 25K into my RRSP for a first-time home buyer. I've bought a home. Now I'm paying interest on that mortgage. Unless I'm getting RRSP matching and/or being lowered a tax bracket, would it make more sense to put future RRSP money against the mortgage to pay it off faster?

Invest in RRSP and put the tax refund against mortgage? Why pay taxes when government can help you pay down the mortgage?

This really depends on your view on real estate trend. If you expect RE to adjust down, putting more $ against principle is almost like throwing money away when you have better investment options.

But if like me that really hates debt, take care of the mortgage first. Investment may win or lose, mortgage is a guarantee lost to the bank.

[tenth]

Originally posted by CapnCrunch


I'm just generalizing here. My point is it doesn't make a lot of sense to pay into an rrsp when your in a low tax bracket, and then take it out later when you retire if you are saving to be in a higher tax bracket.

Like it's been mentioned, there are so many other variables to consider.

But in my opinion, someone fresh out school, making a low-ish salary, and not saving more than $5000 a year should use a TFSA. Once your income increases (higher tax bracket), switch to RRSP's.
Most folks right out of school will be in the 32% bracket (>$44k income), or will be within a year or 2. Unless you have huge taxable investments earning healthy regular returns at retirement putting you in a top tax bracket, odds are when you pull it out it'll be at a lower than 32% average rate just by virtue of the bracket taxation system.

[Xtrema]

Unless you are super rich, or has tons of pensions payment, there is no way your RRSP withdrawal will be taxed at top bracket.

[CapnCrunch]

Originally posted by tenth

Most folks right out of school will be in the 32% bracket (>$44k income), or will be within a year or 2. Unless you have huge taxable investments earning healthy regular returns at retirement putting you in a top tax bracket, odds are when you pull it out it'll be at a lower than 32% average rate just by virtue of the bracket taxation system.

I think you didn't read this part.

"if you are saving to be in a higher tax bracket."