First of all, thank you so much for what you are doing here. Now for "boring" (really interesting) tax questions!
Me: Full time employed. 100K income RRSP: 116 000 (Maxed), Have no TFSAs (45K in room).
Spouse: Full time government employee. 70K income RRSP: 28 000 (15K Contribution Room), Have no TFSAs (45K in room).
Other income: 3 year old, newly incorporated side business for 2016, boomed and earned 100K in 2015, and hoping to maintain that level going forward. Currently have 20K in corporate account.
Notes: Spouse will have a good pension and intends to work until 50-55. 400K owed on mortgage, 1 year old child.
No other debt. Both of us are under 30.
The goal: (Yes this is not near a lean as the true mustachian). Mortgage paid and me FIRE in 12 years with 1.5 million being the target. Not relying on any future business income. Estimated required savings will be 5000 per month to hit this goal, plus making $3300 in mortgage payments.
The question: The business allows us to maintain a nice lifestyle, but still save substantially. Money from the business has been used to pay off all debt but the mortgage and put into our RRSPs. Should we pull money from the company (declare dividends) to max out the TFSAs, or just hold investments in the company, and if so, what kind of investments are better from a tax perspective. I decided against a permanent life insurance policy owned by the company for a few reasons (perhaps you can support/refute that decision). Corporate class funds?
Will not pretend that this is not a great problem to have, but none the less, one that I could use an unbiased opinion on!
Thanks in advance.
I would max out RRSPs every single year due to your pretty high salaries and invest all of this into US and International stocks (ex. 65%VTI and 35%VXUS)
Then, top out both TFSA (if you have 0$ now, then room is 46.5k$) and the best investment for TFSA are canadian stocks and/or bonds
A neat, simple and efficient asset allocation I would do in your situation? your RRSP (116k$) ALL into VTI, your spouse RRSP (43k$) ALL into VXUS. Both TFSA into VCN (or if you are fearful, one of your TFSA into VCN and the other one into VSB.
This would be very tax efficient, simple, low cost, low maintenance and the final result would be 100% stock (37% canadian, 46% US and 17% International) or 82%stock (19% canadian, 46% US and 17% International) and 18% canadian bonds.
Did you think about RESP? You can put another 2.5k$/year and grab the grant (20%). The best place to invest this is canadian stock and/or bonds.
Dividends are pretty tax efficient so you could pull few thousands every year (unless your company may need it)
To reach FI, you do not have to be mortgage free. You can reduce your mortgage to a level you are comfortable with (let say 200k$ for example) but investing, even in a taxable account, is a better way to be FI early. In meantime, always get the lowest mortgage rate you can (variable or fixed 1 year) and let roll.
About that insurance thing, I will let someone else help you...