FormerXBC Inc XEBEQ

RRSP vs TFSA for retirement

[ZouZS3]

How is it more worth it to invest in an RRSP vs TFSA even though taxes are higher today than at retirement ? The only way I think it might be more beneficial is if you invest the tax return because you'll end up having to pay 100% taxes at withdrawal on all the returns you've made on your RRSP investments.l but the TFSA you won't Isn't it more worth it to invest in your TFSA instead?

[tamaracktop]

Absolutely, unquestionably, you are better off putting Xebec in a TFSA. The higher the anticipated roi, the more attractive it is in a TFSA vs an RRSP. Do the numbers.    The TFSA was a rare gift to Canadian taxpayers. It's amazing how many people haven't taken advantage of it. A gift from the CRA is a rare gift indeed.    In an ideal world, where you have a diversified

[ZouZS3]

Marginal tax rate today 37% Marginal tax rate at retirement is 27% You invest 10k in your rrsp today you get back 3700$ So it's like if you invested 6,300$ but there is 10k in your rrsp Your rrsp grows by 20% So you are at 12,000$ at retirement. If you withdraw 12,000$ at retirement you pay back 3,240$ 8 in taxes. So you get 8760$ net. You invest 6,300$ in your TFSA which is the equivalent of

[ZouZS3]

[ZouZS3]

You said "The higher the anticipated roi, the more attractive it is in a TFSA vs an RRSP." So if the return was 1000% versus 20% the numbers would be different and the rrsp would not be as attractive right?

[tamaracktop]

Let's make it simple in the extreme. You make a million on a stock in your RRSP. When you withdraw it, your withdrawls are taxable. In your TFSA, they aren't.

[ZouZS3]

Thank you for your insight professor, it's much appreciated

[trek01]

Keep this in mind, TFSA is way easier to withdraw.  Generally prioritize TFSA investment if you under 40, even low roi will compound. Don't ever overcontribute. If you work outside of Canada for a year, your contribution room for the year won't add.  Don't expect you would invest back the tax returns from RRSP, most pple spend it.

[ferret_ca]

it depends on the individual situation, it's different for someone with a good db pension plan than it is for a person with only cpp and oas,  it you don't have a decent pension you will need a decent rrsp, some people may not even need an rrsp. if you are somewhere in the middle do both, that's what I did when I bought it a coupla years ago ( don't have any at the moment