Comments on: TFSA – Part II: Best Uses http://blog.canadian-dream-free-at-45.com/2010/01/14/tfsa-part-ii-best-uses/ Wed, 08 Feb 2012 17:31:40 +0000 hourly 1 http://wordpress.org/?v=3.1 By: Melanie http://blog.canadian-dream-free-at-45.com/2010/01/14/tfsa-part-ii-best-uses/comment-page-1/#comment-38714 Melanie Sat, 16 Jan 2010 21:19:14 +0000 http://blog.canadian-dream-free-at-45.com/?p=1295#comment-38714 I prefer a TFSA instead of an RRSP because I work for the government, as and as such am entitled to a defined benefit pension plan. Because I am contributing a solid amount of my pay, with employer match, it doesn't necessarily make sense to put more money in a tax-deferred savings plan. It makes more sense for our family to max out the TFSA and max out my husbands RRSP contributions. I prefer a TFSA instead of an RRSP because I work for the government, as and as such am entitled to a defined benefit pension plan. Because I am contributing a solid amount of my pay, with employer match, it doesn’t necessarily make sense to put more money in a tax-deferred savings plan. It makes more sense for our family to max out the TFSA and max out my husbands RRSP contributions.

]]> By: CPS http://blog.canadian-dream-free-at-45.com/2010/01/14/tfsa-part-ii-best-uses/comment-page-1/#comment-38671 CPS Fri, 15 Jan 2010 17:37:29 +0000 http://blog.canadian-dream-free-at-45.com/?p=1295#comment-38671 I look forward to the next article about assets in TFSAs. In agreement with what George said about pension plans. Specifically ones with that large severance pay at the end. You need to save up some room in an RRSP to put that in there to avoid paying to the taxes, so in the interim, putting money in the TFSA is a great way to go. I look forward to the next article about assets in TFSAs.

In agreement with what George said about pension plans. Specifically ones with that large severance pay at the end. You need to save up some room in an RRSP to put that in there to avoid paying to the taxes, so in the interim, putting money in the TFSA is a great way to go.

]]> By: Robert http://blog.canadian-dream-free-at-45.com/2010/01/14/tfsa-part-ii-best-uses/comment-page-1/#comment-38640 Robert Thu, 14 Jan 2010 15:53:36 +0000 http://blog.canadian-dream-free-at-45.com/?p=1295#comment-38640 rab: I've provided the link to the tax brackets. If your tax bracket will be higher in retirement, moving assets from an RRSP to a TFSA, paying the taxes along the way, will probably be best. However, keep in mind the "age amount" deduction, pension income deduction and pension income splitting that are available after age 65. If you don't mind taking risk, you could "melt down" your RRSP using leverage (investment loans). I generally recommend against it, but if you retire early and are willing to go back to work if everything blows up, it could save tax. rab: I’ve provided the link to the tax brackets. If your tax bracket will be higher in retirement, moving assets from an RRSP to a TFSA, paying the taxes along the way, will probably be best. However, keep in mind the “age amount” deduction, pension income deduction and pension income splitting that are available after age 65.

If you don’t mind taking risk, you could “melt down” your RRSP using leverage (investment loans). I generally recommend against it, but if you retire early and are willing to go back to work if everything blows up, it could save tax.

]]> By: Robert http://blog.canadian-dream-free-at-45.com/2010/01/14/tfsa-part-ii-best-uses/comment-page-1/#comment-38639 Robert Thu, 14 Jan 2010 15:50:08 +0000 http://blog.canadian-dream-free-at-45.com/?p=1295#comment-38639 George and Jon: I agree that anyone with little RRSP contribution room can benefit greatly from a TFSA. You've given an excellent real-life example, thank you. George and Jon: I agree that anyone with little RRSP contribution room can benefit greatly from a TFSA. You’ve given an excellent real-life example, thank you.

]]> By: Jon Snow http://blog.canadian-dream-free-at-45.com/2010/01/14/tfsa-part-ii-best-uses/comment-page-1/#comment-38634 Jon Snow Thu, 14 Jan 2010 14:07:54 +0000 http://blog.canadian-dream-free-at-45.com/?p=1295#comment-38634 I'm one of those with a good pension plan who hasn't really been able to contribute much to an RRSP thanks to the pension adjusment. So yes, the TFSA is vital for my retirement plan... This year, thanks to some carry over, I'm able to contribute $19000 to my RRSP and I think I can JUST manage that. I’m one of those with a good pension plan who hasn’t really been able to contribute much to an RRSP thanks to the pension adjusment. So yes, the TFSA is vital for my retirement plan…

This year, thanks to some carry over, I’m able to contribute $19000 to my RRSP and I think I can JUST manage that.

]]> By: rab http://blog.canadian-dream-free-at-45.com/2010/01/14/tfsa-part-ii-best-uses/comment-page-1/#comment-38633 rab Thu, 14 Jan 2010 14:01:23 +0000 http://blog.canadian-dream-free-at-45.com/?p=1295#comment-38633 What about this scenario. You retire early and will earn less than $40k/yr. between now and 65 when you intend to take your government benefits and start drawing from your RRSPs. I assume it would be a good idea to start drawing from the RRSP now and contributing the withdrawal to a TFSA. Presumably, the total income after 65 would be higher than the current income so it would be wise to redirect it to the TSFA. You might have to pay some tax on the RRSP withdrawal now but it would be less than when the other income kicks in at 65. Does that sound reasonable? Or am I missing something? What about this scenario. You retire early and will earn less than $40k/yr. between now and 65 when you intend to take your government benefits and start drawing from your RRSPs. I assume it would be a good idea to start drawing from the RRSP now and contributing the withdrawal to a TFSA. Presumably, the total income after 65 would be higher than the current income so it would be wise to redirect it to the TSFA. You might have to pay some tax on the RRSP withdrawal now but it would be less than when the other income kicks in at 65. Does that sound reasonable? Or am I missing something?

]]> By: George http://blog.canadian-dream-free-at-45.com/2010/01/14/tfsa-part-ii-best-uses/comment-page-1/#comment-38630 George Thu, 14 Jan 2010 12:57:47 +0000 http://blog.canadian-dream-free-at-45.com/?p=1295#comment-38630 There's a third group of people who can benefit greatly from a TFSA: People with good pension plans. These people may not earn several hundred thousand per year, but because of the pension adjustment (PA), they may be very limited in the amounts they can contribute to an RRSP. For these people, a TFSA makes an excellent complement to an RRSP for retirement savings. There’s a third group of people who can benefit greatly from a TFSA: People with good pension plans. These people may not earn several hundred thousand per year, but because of the pension adjustment (PA), they may be very limited in the amounts they can contribute to an RRSP. For these people, a TFSA makes an excellent complement to an RRSP for retirement savings.

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