tag:blogger.com,1999:blog-5465015914589377788.post25169983415882616..comments2024-02-17T11:07:06.232-05:00Comments on Michael James on Money: RRSP vs. TFSA: Downside Protection ConsiderationsMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-5465015914589377788.post-47433194106819701512020-11-01T15:06:46.988-05:002020-11-01T15:06:46.988-05:00The comment above is a reply to Chris' comment...The comment above is a reply to Chris' comment:<br /><br />Of course, these sorts of comparisons make the assumption that the RRSP rules won't change and tax rates after retirement will remain substantially lower. While it's not something I worry about a lot, over a long enough time frame anything is possible.<br /><br />Granted, the rules for TFSAs could change as well, but collecting taxes from an instrument with "tax-free" right there in the name (and holding capital on which income tax has already been paid) seems more difficult politically than raising tax rates on RRSP withdrawals.<br /><br />Just a thought.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-39497974965806276432012-02-21T13:51:14.945-05:002012-02-21T13:51:14.945-05:00OAS clawbacks kick in at >68K income per year, ...OAS clawbacks kick in at >68K income per year, for most people it won't be an issue. Couple of other advantages of RRSP for some in the high(er) tax brackets are: If one has to go a while without a job, then you can withdraw from the RRSP and pay a lower tax. Also, I believe there are 2000$ to be claimed per year off of an RRSP/RRIF for pension as well as 5000$ to be withdrawn tax free per year from RRSP/RRIF.Cristianhttps://www.blogger.com/profile/05616100929947962431noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-46118277498684808862011-01-10T23:23:09.043-05:002011-01-10T23:23:09.043-05:00@Canadian Investor: We're talking about a per...@Canadian Investor: We're talking about a person who is currently paying the top or near top marginal tax rate and who is trying to decide whether to save in an RRSP or TFSA. This eliminates GIS clawbacks in all but the most extreme scenarios. OAS clawbacks only occur if this person has a high income in retirement. So, I think my argument still holds.<br /><br />I think it is possible to consider a range of possible futures including good and bad financial fortune without losing the incentive to work.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-58412572398931689252011-01-10T21:52:29.593-05:002011-01-10T21:52:29.593-05:00I have to say being a savvy investor myself, that ...I have to say being a savvy investor myself, that is a valid argument. However one would need to not only do the math but take into consideration OAS and GIS clawbacks and pension upon retirement.<br /><br />IMO also if you take this sort of view that you can make less money in the future, it might lead to a person having less incentive to work harder and make more.Canadian Investorhttps://www.blogger.com/profile/00364781175010554794noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-49780858531340531462011-01-08T14:30:46.673-05:002011-01-08T14:30:46.673-05:00@Anonymous: Agreed. I haven't formed an opin...@Anonymous: Agreed. I haven't formed an opinion on how much lower than a 45% present marginal tax rate the preference for an RRSP over a TFSA persists.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-9647151964260666012011-01-08T04:26:45.697-05:002011-01-08T04:26:45.697-05:00There's a general rule in taxation - a tax def...There's a general rule in taxation - a tax deferred, that is, one that will be triggered by the taxpayer - will almost always be paid at a lower rate. I'm not referring to the emergency situation, but in most other cases, where the taxpayer has some control over timing.<br /><br />For this reason and those you've mentioned, very much agree that RRSP is favourable for those paying much income tax; I'd put the bar far lower than the 45% marginal tax bracket.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-12309908174225618752011-01-07T19:15:37.654-05:002011-01-07T19:15:37.654-05:00@Chris: Your comment definitely applies to the ca...@Chris: Your comment definitely applies to the calculations some do to come up with some slim advantage for one or the other in normal circumstances. However, the conclusion that RRSPs work better for a disaster scenario later in life isn't very sensitive to changes in tax rules.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-85134208820765975872011-01-06T12:56:25.915-05:002011-01-06T12:56:25.915-05:00@Potato: That's true, but you'd have less ...@Potato: That's true, but you'd have less to take out.<br /><br />However, ss Michael replied, being in a lower tax bracket at contribution time makes a big difference.Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-66212325312226951192011-01-05T14:58:13.555-05:002011-01-05T14:58:13.555-05:00@Potato: My reasoning depends on being at the top...@Potato: My reasoning depends on being at the top (or near the top) marginal tax right presently. I agree that TFSAs look more attractive than RRSPs when you're presently in a low marginal tax rate.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-56776365953743699012011-01-05T14:32:09.520-05:002011-01-05T14:32:09.520-05:00Interesting, I came to the opposite conclusion for...Interesting, I came to the opposite conclusion for the "what if the future is terrible" scenario. I figure the TFSA was the one to fill first because if something happened before retirement, I could get the money out without a tax hit, and the contribution room would still be there to get going again.<br /><br />Of course, I was in the bottom marginal tax bracket for 2009, and might not be much higher for 2010.Potatohttp://www.holypotato.netnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-18254923748216905372011-01-05T12:32:25.663-05:002011-01-05T12:32:25.663-05:00Yes, that's exactly right. I've done thos...Yes, that's exactly right. I've done those calculations myself!Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-79939184484621727042011-01-05T12:10:57.003-05:002011-01-05T12:10:57.003-05:00@Patrick: Thanks. I think this is yet another ca...@Patrick: Thanks. I think this is yet another case where it's possible to do some exact calculations and come up with a not very useful answer.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-47781949000583229112011-01-05T11:58:44.982-05:002011-01-05T11:58:44.982-05:00Very smart. I never looked at it that way before....Very smart. I never looked at it that way before.Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.com