http://www.taxtips.ca/taxrates/qc.htmThe 18% is the capital gains rate. Capital gains are currently taxed at 50% of the income tax rate, in every tax bracket you pay half. So if I owe 18% on the gains and then get a credit for 36%, you come out ahead! Pretty sweet deal. Sure you could have it growing inside an RRSP, but why not make it easier to max out the RRSP with extra free money? At the end of the day you'll still have the same amount invested, but the capital gains route gives you a bonus amount to invest.
Numerical strategy is fairly simple. At any income under $45,000 put money into a TFSA, only after its maxed do we consider RRSP/investment account. Incomes over $45,000 are suitable for RRSP contributions ($45K is approx. of course) to bring taxable down to $45K. Investment accounts are super friendly to dividends when you have income under $45K, still fairly friendly over $45k. Capital gains are always better than wages, you control when you want to pay the tax (by selling your ETF) and the tax rate is 50% that of income.
In the real world you live in, you'll likely find that contributing to the Max RRSP every year will come out that years cash flow. I fully expect you may attempt option 3, but find it pointless because you have so much cash flow that you fund all future RRSP contributions with your wages. I don't understand why you won't have another $10,000 to invest next year and all subsequent years. Every time you get a pay raise it gets easier to make bigger contributions; lets be optimistic and say you're awesome and get promotions and raises. Very soon you'll wish you still had room.
If I had a time machine and could talk to you in 5 years I expect that you never bother to move the cash over to an RRSP from a taxable account. Instead you'll find it to be the third pillar of your retirement savings. How the withdrawal strategy works for FIRE is fun. If you invest $20,000 into an ETF (2017) and it increases over 10 years (2027) to $40,000 you have a years worth of living expenses there (lets pretend you spend $40k/year). You would sell the entire ETF and spend the cash on bills, all $40K. At tax time you would report that you sold it and had $20,000 in capital gains ($40-your original $20). The tax form says to multiple the gain ($20K) by 50% to get $10,000. That $10K is then taxed at the marginal rate for your province. If that is your entire income, you are below the minimum income threshold for Quebec, so you owe $0 for your 2027 taxes. Tax free was a misnomer, the correct phrase was you owe $0 in taxes.
If you pull $40K out of an RRSP you need to pay about $7,663 in taxes for the year (use Canadian Bens calculator, its great). If you pull $40K out of a TFSA you pay $0. Notice how the investment account is similar to the TFSA, its very nice.
If you spend less than $40K/year you blend RRSP withdrawals with Capital gains to get a taxable income equal to the basic exemption. That sort of trickery allows you to get an RRSP refund now and avoid paying taxes later, best of both worlds. It also allows the TFSA to remain untouched!
Always leave the TFSA alone until you need it, when you hit 65 it becomes your best friend. The TFSA is the Ace up your sleeve, even in FIRE you should move money into it if possible. That's something far into your future, don't worry too much about it now.
I'm a buy/hold investor. I don't sell ever; I buy more of whatever fund I'm under allocated in. Selling is for people that don't have regular contributions or really large accounts where the extra cash is dwarfed by the amount you put in. I wish I had that problem...then I would be retired.
Last caveat; I assumed you will have increasing wages. If you expect your wage to be constant at $50K this is way too complicated. For a great plan you need to estimate current wage, future wages, province and retirement age as well as withdrawal rates; I also included marital status in mine (children too). Everyone's plan needs to be customized, there is no single plan that works best for everyone.
