I thought I'd post parts of the conversation between myself and Prairie Stash- It was very illuminating. I'm still going to need to work on the withdrawal strategy eventually, but right now I'm focused on the accumulation stage. Here's what I sent back:
Dang! I've been taken to school! I would delete my original thread after being so well corrected, but I figure I should leave it up so that anyone who shared my erroneous belief can also get the correction!
I suppose the reason I assumed the RRSP would be taxed less was that I assumed my declared income in my retirement (post 65) would be quite low, likely lower than even the middle tax bracket- I'm aiming for a 22K/year SWR at the moment. So the first ~10K of that is tax free, but then the next 10K is at full rates. If I change that situation to be from a taxable, still withdraw the 22K after selling, then I only pay 50% the tax and even then, only on the value of the gain, rather than the value of the initial investment (which, in a taxable account, I've already been taxed on once due to income.)
I tried to diagram this out, but my algebra has always been crap. So far I have the following written on a piece of paper, to reflect the two situations:
Let ρ= Full marginal tax rate.
RRSP situation:
Income ---> Taxed at 1ρ ---> Invested into RRSP ---> Deducted at 1ρ ---> Growth ----> Withdrawal -----> Original Investment + Growth Taxed at 1ρ.
So, kinda crappy, as it will always be taxed at 1ρ.
Taxable account situation:
Income --> Taxed at 1ρ ---> Invested into Taxable --> Growth ---> Withdrawal ---> Growth only, taxed at 0.5ρ.
So in both situations, the original investment is taxed at 1ρ once, and then in the RRSP situation, your capital gains are taxed at a full 1ρ, whereas Taxable accounts would only tax them 0.5ρ.
TFSA Situation
Income --> Taxed at 1ρ ---> Invested in TFSA ---> Growth ---> Withdrawal ---> Original Investment + Growth taxed at 0ρ.
So, if I have this right:
RRSP = 1.0ρ on gains, 1.0ρ on original
Taxable = 0.5ρ on gains only, 1.0ρ on original
TFSA = 1.0ρ on original, 0ρ on Gains.
If that's true, then I feel like a complete moron for filling my RRSP before my TFSA. I mean, they're both maxed out now, and I'm currently pouring everything in my life into my taxable, as it's all I have left to fill- but the order of operations should have been different.
Now, Prairie Stash informed me that capital gains are not just taxed at 0.5 marginal tax rate- It turns out, you take the dollar figure of the capital gains, multiply by 0.5, and *then* apply marginal tax rate. Which led a few theoretical situations they presented of literally paying no tax- For example, if you withdrew 20k of money from a taxable account, and 10k of that were gains, you'd apply your marginal tax rate to half the gains, which would be applied to 5k.
Now the part I want to confirm is this- Does that 5k that your full marginal tax rate is applied to still fall under your basic income exemption, therefore allowing you to pay no tax on that gain as long as that's your only 'income' for the year?