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Thread: RRSP or TFSA. Where to put more $$

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    Default RRSP or TFSA. Where to put more $$

    I am not having any luck searching, but I am sure this has been discussed before.....

    At what point do you start depositing more into a TFSA than a RRSP? Maxing out both isn't an option.

    Let's hear some strategies on how you direct your savings.

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    I max my TFSA first then do RRSP after. I keep my RRSP room for when I'm later in my career and earning more money
    Nolan

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    To me, the RRSP depends on your current tax bracket, the expected tax bracket of when you want to contribute, and the expected tax bracket when you withdraw, and the age you plan on withdrawing.

    Personally, I max TFSA first for flexibility in case my bid on the Shaw home is a winner.

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    There's pros and cons to each. Me, I'm a short term thinker and I really like the positive reinforcement of getting a bigger tax refund because of my rrsp contribution.
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    Quote Originally Posted by pheoxs View Post
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    I max my TFSA first then do RRSP after. I keep my RRSP room for when I'm later in my career and earning more money
    I know this is the right thing, but I feel that I'm at the top of my earning potential. I don't see any substantial wage increases until inflation really makes one happen. Who knows what the future holds though.

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    Quote Originally Posted by The_Rural_Juror View Post
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    To me, the RRSP depends on your current tax bracket, the expected tax bracket of when you want to contribute, and the expected tax bracket when you withdraw, and the age you plan on withdrawing.

    Personally, I max TFSA first for flexibility in case my bid on the Shaw home is a winner.
    This is my problem, I don't see a bump in my tax bracket in the future, and also don't want to have too much (compared to TFSA) in the RRSP when I start to withdrawal.

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    Quote Originally Posted by ExtraSlow View Post
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    There's pros and cons to each. Me, I'm a short term thinker and I really like the positive reinforcement of getting a bigger tax refund because of my rrsp contribution.
    yep. Agree. Love that big return

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    Try doing it backwards.

    Write down what your major expenses will be in the next 5, 10, 15, 20 years. These will be things like a car, replacing appliances or the windows in your home, how old is the roof in your house, will you need to buy your kids a car etc. From that you can gage if you need to bump up the TFSA portion.

    A lot of my old clients would dump a shit ton of money into the RRSP. But would have no short or medium term savings in the TFSA to cover things as mentioned above. You can imagine what happened when some of those things needed replacing and all their money was in a RRSP.

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    TFSA all the way. Fully invested. Mine has been doing quite well and I'm thinking of cashing out the gains and throwing them into my RRSP. That will help reduce my tax liability at tax time. The main problem with doing this is, by putting the gains into an RRSP, those gains become taxed later on in life when using the RRSP.

    But, yah, TFSA first for me.
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    So, when is everyone going to switch from TFSA to RRSP? Is ther a income number or an age or what? I assume everyone will eventually use the RRSP since I doubt people will need as much income in retirement as there peak earning years
    Last edited by arcticcat522; 11-17-2019 at 12:52 PM.

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    Quote Originally Posted by 16hypen3sp View Post
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    TFSA all the way. Fully invested. Mine has been doing quite well and I'm thinking of cashing out the gains and throwing them into my RRSP. That will help reduce my tax liability at tax time. The main problem with doing this is, by putting the gains into an RRSP, those gains become taxed later on in life when using the RRSP.

    But, yah, TFSA first for me.
    That seems like it completely takes the advantage of the tfsa away. No?

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    Quote Originally Posted by arcticcat522 View Post
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    That seems like it completely takes the advantage of the tfsa away. No?
    A little bit. Not entirely though, cause he won't be paying tax on any of the growth already realized in the TFSA. Still wouldn't be my choice though, I'd leave the TFSA and then just start contributing to RRSP instead of emptying the TFSA.

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    What are you guys doing about US dividend income in your TFSA? You guys do know it's not tax-sheltered even in a TFSA, yes?

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    Quote Originally Posted by suntan View Post
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    What are you guys doing about US dividend income in your TFSA? You guys do know it's not tax-sheltered even in a TFSA, yes?
    Pay taxes on it.

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    Quote Originally Posted by suntan View Post
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    What are you guys doing about US dividend income in your TFSA? You guys do know it's not tax-sheltered even in a TFSA, yes?
    I am aware of that, but didn't think there was anything you could do. Also, it's a small percent of a small percent

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    Quote Originally Posted by cjblair View Post
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    A little bit. Not entirely though, cause he won't be paying tax on any of the growth already realized in the TFSA. Still wouldn't be my choice though, I'd leave the TFSA and then just start contributing to RRSP instead of emptying the TFSA.
    Exactly. But the real only benefit to moving gains to RRSP is to reduce income tax liability this year. I probably wouldn't do it if it weren't for CRA trying to pry tax installments out of me in Sept. and Dec... which they can go fuck themselves on.

    I have my next batch (assumed to be $6k) ready to go into my TFSA for 2020. Wish the limit was way higher... I probably wouldn't do any RRSP crap at all.
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    OP, I think you need to look at your tax situation for this current year. Since you're also talking about RESPs I'm assuming you have one or more small children so it's possible you already have a bunch of deductions (like childcare). If you're going to be paying a low tax rate already because of this then TFSA is the way to go.

    If you think you're near the top of your earning potential then I say buy the RRSPs. Do you have a bunch of carryover room from year's previous? If so then take your 2019 tax return (you'll get it in the first half of 2020) and dump that into the RRSP as well which, assuming you make the same contributions throughout 2020, will mean you get an even bigger return in early 2021. Repeat each year until you've caught up on your RRSP room and then you can take each year's refund and put it into TFSA. Getting that tax refund money invested each spring and working for you is huge at retirement time assuming you have the discipline to do it all the way along.
    Last edited by Masked Bandit; 02-25-2020 at 10:22 AM.
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    Quote Originally Posted by Masked Bandit View Post
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    OP, I think you need to look at your tax situation for this current year. Since you're also talking about RESPs I'm assuming you have one or more small children so it's possible you already have a bunch of deductions (like childcare). If you're going to be paying a low tax rate already because of this then TFSA is the way to go.

    If you think you're near the top of your earning potential then I say buy the RRSPs. Do you have a bunch of carryover room from year's previous? If so then take your 2019 tax return (you'll get it in the first half of 2020) and dump that into the RRSP as well which, assuming you make the same contributions throughout 2020, will mean you get an even bigger return in early 20201. Repeat each year until you've caught up on your RRSP room and then you can take each year's refund and put it into TFSA. Getting that tax refund money invested each spring and working for you is huge at retirement time assuming you have the discipline to do it all the way along.
    My deductions won't help much in regards to the tax bracket. I started to use my return to re invest into rrsp's and I think it's a great way to put more away. That's part of why I asked the question. I could keep doing that, but it would grow the RRSP considerably larger than my tfsa. Plus, I don't see when I could be caught up to my RRSP contribution limit. I think I will use this year's return for an additional tfsa contribution.

    I am 36 with 2 young children, so I don't think I will ever be able to max out both and just want to have a good split of income to avoid taxes as much as possible if I ever retire

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    +1 for dumping RRSP returns back into investments. Too many folks end up treating it as a windfall or extra paycheck to spend.

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    Quote Originally Posted by arcticcat522 View Post
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    I am 36 with 2 young children, so I don't think I will ever be able to max out both and just want to have a good split of income to avoid taxes as much as possible if I ever retire
    There is a lot of variables and a lot of different way to do this based on risk/debt/expenses/asset.

    General rule is RRSP and tax rebate is better if you have income in the $95K or above brackets that's taxed at 36% (or more). So for every $10 you put in, you get $3.6 back that you can then either put it toward RESP for the kids or TFSA as rainy day fund. And when the time for the $ to come back out, it'll be taxed at 25%. A saving of 11% (Assuming CPP+OAS already covered your basic personal amount) + protected growth.

    RRSP is money you can afford to put away and not need it until your EI runs out or retirement actually starts. If you need money for rainy day fund, TFSA is a better vehicle. Also, if you make less than $95K, your tax saving is minimal in the future. So you may as well do TFSA and enjoy the flexibility.

    There is another scenario where you are too young for OAS and CPP and you are out of work and EI ran out. In this scenario, you could withdraw around $30K/year from RRSP and enjoy average tax rate of around 12.51%. So there is still tax savings there.

    So yeah, it's really which scenario you are preparing for.
    Last edited by Xtrema; 11-18-2019 at 03:26 PM.

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    Quote Originally Posted by Xtrema View Post
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    There is a lot of variables and a lot of different way to do this based on risk/debt/expenses/asset.

    General rule is RRSP and tax rebate is better if you have income in the $95K or above bracket that's taxed at 36% (or more). So for every $10 you put in, you get $3.6 back that you can then either put it toward RESP for the kids or TFSA as rainy day fund. And when the time for the $ to come back out, it'll be taxed at 25%. A saving of 11% + protected growth.

    RRSP is money you can afford to put away and not need it until your EI runs out or retirement actually starts. If you need money for rainy day fund, TFSA is a better vehicle. Also, if you make less than $95K, your tax saving is minimal in the future. So you may as well do TFSA and enjoy the flexibility.
    Are you only going to withdraw 45k per year max though? Anything 45k-95k would be taxed at 30.5%.
    Nolan

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