Author Topic: RRSP vs TFSA: Help me decide what to do!  (Read 1285 times)

PharmaStache

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RRSP vs TFSA: Help me decide what to do!
« on: July 04, 2015, 07:36:55 PM »
Help me settle a debate I'm having with myself!  I'm trying to decide if we should continue contributing money towards my husband's RRSP.

The details:
-he makes 75k/year, going up to a max of 85k in about 3 years
-his pension contributions (teacher) eat up most of his RRSP room.  This money can never be converted to a RRIF or cash, it must be taken as a pension (so for early retirement, the only option is a reduced amount)
-he has about 3k/year of RRSP room accumulating each year
-he has about 25k of RRSP room left from previous years (we were going by the assumption that when his income was lower, it really didn't make sense to add more to his RRSP, especially considering his pension)
-we are working on catching up on our TFSAs; his will be completed by the end of 2016

Should we still be contributing to his RRSP?  Should we wait until he is at his max income?  Should we wait until we've maxed out our TFSAs?  If we choose not to, the money will be going towards catching up on our TFSAs. 


okits

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Re: RRSP vs TFSA: Help me decide what to do!
« Reply #1 on: July 04, 2015, 09:23:13 PM »
$85k doesn't put him much into a higher tax bracket (if at all), so I would max out the RRSPs now and shelter as much income (within his current bracket) as you can, now.  Since you are planning to ER he can pull that RRSP money out (without limits, like his teacher's pension) before getting any CPP/OAS and pay a much lower tax rate on it.

What's your marginal tax rate?  Does a spousal RRSP make sense?

RichMoose

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Re: RRSP vs TFSA: Help me decide what to do!
« Reply #2 on: July 05, 2015, 12:32:48 AM »
I'm in a similar situation as yours. My strategy was to max out the RRSP first and use the refunds to my TFSA.

PharmaStache

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Re: RRSP vs TFSA: Help me decide what to do!
« Reply #3 on: July 05, 2015, 09:01:56 AM »
Since you are planning to ER he can pull that RRSP money out (without limits, like his teacher's pension) before getting any CPP/OAS and pay a much lower tax rate on it.

Good point!  Definitely no spousal RRSP, I make a bit more.