Hi All,
I have not posted earlier in the week because this thread deserves more thought / analysis than the others.
What I did run (first) were several scenarios comparing RRSP to TFSA.
I think we all agree that TFSA are amazing, flexible vehicles that offer so much to people in nearly every income bracket..
Low income, especially under $46k - best all around savings vehicle (excepting h the CCB benefit for families under $60k/yr -- now with the more generous rates, getting a modest income to a low income has large benefits in transfer payments to you directly).
Medium income -- There is no difference in putting money into TFSA and RRSP if your tax rates at withdrawal are the same as today.
High income -- If you are over $100k per year, you should be maxing out RRSP and TFSA's, both. The ability to pull large lump sums in retirement from a TFSA are amazing to retirees. (for a vacation, a gift to someone for education, to buy a car, etc).
So far, the only time one should put money into RRSP's over TFSA's (when you don't have enough for both) seems to be:
1) Lower income -- When you get tax transfer payments (example CCB, but maybe disability or others, too) from the government for low income, and they take the Adjusted income number AFTER RRSP contributions.
2) When you have a strange "spike" year or years in RRSP, pushing you into a high marginal tax bracket that is unusual for you. e.g., severance pay or vacation payouts upon termination, a large bonus from work, you have just sold an asset and have a large capital gain.
Why is RRSP contributions for a tax refund not on this list? Because it makes zero difference, after tax, if your tax bracket is identical. Further, unless you are automating through payroll contributions, many (or MOST) people that do not max their RRSP's also do not put the full tax refund back into the RRSP, eroding the savings.
Why don't I include overall high income earners here? Because they should be maxing RRSP and TFSA's both, not choosing one over the other.
NEXT:
RRSP versus NON-TAXABLE When would deferring an RRSP claim make more sense than a non-taxable account?
How is this possible? because at any point in the future you can transfer from the taxable account into the RRSP and get an even larger future refund. Then it becomes a situation of RRSP with an immediate claim, which is better than taxable accounts.
RRSP>Taxable>RRSP with a delayed claim