Thank you for the great advice. The $500/month to TFSA (sorry meant to type $500 for TFSA not $600) is based on the maximum allowed by the Canadian government ($6,000 per year). TFSA is otherwise maxed out. And the $600/month towards RRSP is just based on what I feel I can afford at the moment. I usually increase the RRSP a little with every salary increase I get at work. I do have contribution room in my RRSP's but I see that as okay, because of my defined benefit pension. My Dad said that too much invested in RRSP can become a problem later in retirement, especially if you have a defined benefit pension plan as you are forced to withdraw from RRSP at a certain age, which can put you into a higher tax bracket; defeating the purpose of the RRSP.
Mortgage I'm paying off semi-aggressively...it's a 20 year amortization instead of 25 years at the moment. And I plan on making some lump sum payments once the emergency fund gets bigger then it needs to be.
Can you please clarify what exactly are non-taxable investments?
$6000 doesn't happen till 2019...hopefully you only do $5500 this year if you have no carryover room in the TFSA.
https://www.taxtips.ca/tfsa/contributions.htmAs always, standard advice is to consult your CRA account for contribution limits at:
https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.htmlYour dad had a point to consider. Its not an urgent rush but you should understand what he means and see if it will apply to you.
Non-taxable investments are investments that you buy/hold until retirement (a misnomer, it should read delayed minimized taxation, but its non-taxable in your earning years) it can outperform RRSP in certain cases, it will almost always underperform TFSA*. Lets say you buy something from Horizon's ETF offerings, $50,000 worth and hold it until you're 50+. Much like a TFSA, you pay tax on the initial $50k, so far its even. When you're 50+ though, you also pay tax on the gains when you sell. However, gains tax is funny, you take your gains and muliply it by 50%, so if your investment is $150,000 (100k gains) when you sell you only pay tax on $50k (but get to spend $150k). Of couse you could spread that out over a few years, maybe sell $30k/year and pay tax on the $10k, keeping you in the bottom tax bracket including your pension. This is what your dad was alluding to as the solution, you can contol the amount and timing of selling, you can control the taxes. You can also sit on it till you're 80, you're the boss here.
This is how you get an irregularly large amount without tapping the TFSA and avoiding the RRSP. Its also pertinent to people like you who are destined to run out of contibution room - a pretty awesome problem. Run your own forecast, am I right that you will have to slow down RRSP contributions before you retire? Its just a guess, but its funny how often that happens to people on this forum, its a super saver problem. The solution is to start the taxable before you drain your room so as to optimize the RRSP into the highest tax brackets possible.
Please don't follow my advice blindly, come up with a plan that works for you. Explain to yourself why a non-registered account is unnecessary, if you can articulate the pros and cons then you will get it right. I'm basing everything on a wild guess that you will run out of RRSP room sooner then your retirement date.
*there is a rare case in Ontario where you get negative tax on Canadian dividends where it can decrease taxes, in that case you can technically beat the TFSA (barely)
