Don't forget, these conventional rules of asset allocation / tax efficient investing might not apply to a Mustachian. Probably the biggest example is the RRSP, which is the best savings account for most Mustachians that earn an above average income and have low spending. Here's a clear, simplified example of why you should not ignore the RRSP, or follow tax-wise thinking that RRSP's should be used primarily for lower interest returns.
Scenario A: I live in Alberta (the easiest province for tax calculations because of the flat 10% income tax), I'm 30 years old, I earn $100,000 a year (36% bracket). My wife, also 30, earns $70,000 per year (32% bracket). Our spending is $40,000 per year, a lot of money for me if my mortgage was paid off. For simplicity sake let's say inflation, bracket adjustments, and salary increases don't exist. On my RRSP contributions, I only have to contribute $11,500 net income to max my $18,000 RRSP room because of course the RRSP is pre-tax. My wife only has to contribute $8,500 net to get to her $12,600 annual increase in RRSP room. After investing for 15 years, at 6% "real" return (remember inflation doesn't exist) the combined value of our RRSP's is $800,000, $470,000 for me, $330,000 for wifey. I want to slowly draw down the value of my RRSP before I hit 71, so let's say I move to a safer asset allocation and withdraw 5.5% a year for a gross income of $44,000. We file together, as we should, so on my $23,500 income, I pay a whopping $3,000 in tax for a rate of 11.6%. On wife's $18,150 income, she pays $1,100 tax for a rate of 6%. Our net income is a hair under $40,000.
Scenario B: Let's say I heard some things online that I interpreted to mean RRSP's shouldn't be used for stock investing and I choose to invest in a taxable account instead because I know stock returns are better than bond/GIC returns over a long period of time. Using the after-tax investment amounts ($11,500 for me and $8,500 for wifey), in 15 years at 6% I have $300,000 and wife has $220,000 for a total of $520,000. Now we know that capital gains are tax efficient so let's save ourselves the headache of calculating adjusted cost base and just say that at our spending levels our tax rates are 0%. We now have to draw 7.7% of our investment to get our $40,000 spending cash. Don't forget this 6% real return may be harder to achieve in a taxable account because if I'm panicky and buy and sell stocks throughout my buildup period I will have to pay taxes on the capital gains that exceed the capital losses.
In scenario A, retirement is definitely a reality. We retire at 45 years old and draw 5.5% a year for 15 years, by the time we hit 60 we can collect CPP, then OAS at 67, so our drawdown's will decrease according. I kept it very simple for this illustration, but we also have some easy tricks up our sleeve that can make our RRSP income more even, thereby reducing my tax rate and marginally increasing the wife's to make the scenario even more tax efficient. In fact, I bet we could make our true drawdown more like 5% instead of 5.5% because we could pay virtually no tax.
There are of course a few things to remember.
First, if you vision your retirement to include 2 homes, a large diesel guzzling hotel on wheels, 2 luxury vehicles, luxury vacations spanning the globe, and so on you will need much more than $40,000 per year so RRSP may not be as suitable from a tax perspective.
Second, if you earn money in the lowest tax bracket (generally less than $42-$44,000 per year), don't even bother with RRSP's because your savings will be marginal anyways.
Third, don't let your RRSP value run up to high; if you're say 55 years old and have over $1 million in RRSP accounts and spend only $30,000 a year you will start to hate the CRA when you turn 71 and they force you to withdraw amounts that double or triple your spending needs and pay exorbitant amounts of taxes... time to spoil your favorite charity or political party, or maybe consider a vow of perpetual poverty and join a convent or monastery. :)
Fourth, don't ignore the benefits of having NO DEBT (aside from qualifying investment loans I suppose) in retirement. You pay income taxes on the dollars it takes you to pay your debts off, so a mortgage and car payment or two might bump your gross income needs from $44,000 a year to $65,000 a year in a real hurry.
And finally, the no inflation, constant rate of return world where a couple earns $170,000 a year but only saves $30,600 of that with spending of $40,000 I used in my scenario isn't real, but hopefully it paints a somewhat accurate picture.
My point is not to get too tax sensitive and to know your own personal numbers. Holding GIC's in a TFSA (CCP advice) is not very smart from a simple view because the biggest benefit of the TFSA is the "no more taxes" part. GIC's real return is less than 1% on average, so if you invest $5,500 a year for 15 years in GIC you end up with $94,000. Of which $82,500 is your contributions. Very tax efficient indeed, but you wouldn't have paid much tax on that pitiful gain anyways. So try and max the return on the TFSA as much as you can (ie. invest in stocks!). Don't over think the Canadian dividend thing in taxable accounts because even with a DRIP you will be paying taxes on those payouts at a high rate throughout your saving period. For the $100,000 income dude in Alberta, you will pay over 25% tax on those dividends every year even though you won't be spending them. If I invest in a taxable account, I would much rather have my return in the form of capital gains that I can easily defer until retirement.