Investment questions...RRSP VS TFSA

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4spdragtop

4spdragtop

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Hi all, what can you tell me is the difference between the 2? Advantages/disadvantages?
We went to speak to our new financial advisor and I asked him about buying a small lump sum RRSP. He said to buy a TFSA(tax free savings acct).
BUT from what I see(online anyway) there is a large difference in %'s.
RRSP approx 2%, meanwhile TFSA is approx 0.10 % ??
Curious what the benefits would be between the 2.
Our financial advisor is new, BUT the company he works for Sunlife I have been with for quite a while.
Thanks
Steve
 
EI EI Oh!!!

With the alphabet soup stuff in your title.

Sorry I don't know anything about the Canaukinstein retirement programs. If there is something that you can have that is self directed, that is what I would do. Life insurance and annuities are usually poor returning investments over the long haul.

Most "Financial Advisors" make money selling you something. Remember that.
 
Thanks Rob, RRSP=Registered retirement savings plan, while TFSA=Tax free savings acct. Rrsp is taxed when you withdraw, while the tfsa is not. But the growth % difference at 1st glance seems substantial.
Yes advisors get paid, whether a % or a fee of some sort.
 
I wouldn't sign up for either of those rates Steve. Hell, you can buy bank stock and make a 4% dividend. At those rates, you are not even keeping up with inflation, and there is probably some sort of "lock in".

You've got a lot more to think about.....Tax strategy being the biggest. We did RRSP's while we were working and in a high tax bracket. We took advantage of the tax savings at that time. Over the years, the value grew tax deferred until we retired (young). At that point, being on pension, we began withdrawing the max amount from our RRSP's while keeping our income at the top of the lowest tax bracket. That enabled us to pay the least amount of tax on the withdrawls. Wrote it off at max tax and took it out at min tax. Ironically, with pension sharing, we get all of the witheld tax back in May once our taxes are processed. So, our withdrawls are essentially "tax free". That money (from the RRSP withdrawl and the tax refund) goes straight into the TSFA where I manage good quality high dividend paying stock portfolio for tax free income in our golden years (56).
 
well if you had a big money year and want to save some income tax RRSP is good for that and you can get a nice growth over time .
TFSA your income tax is already paid because it's bought with taxed income and any money you make with it is tax free . the TFSA is up to 79500 i think and you can buy 6000 a year . what i do is buy RRSP to save on income tax and i invest my tax free in the stock market in good divident stocks . i made 36% on my RRSPs and 28% on my tax free last year .
 
Thanks Troy, altho I like to think I'm a "math" guy, what you have said is a LOT to take in. I was in a group LIRA when I was with Toromont, that grew 25% last year alone. Even our advisor was shocked at that lol. I have a "little bit" sitting stagnant in my savings account, and was going to buy a lump sum RRSP, and he advised against it?? Part of his reasoning is my age(54) and IF I retire at 65(highly doubt it) that there is "too short" of time to reap the benefits (theoretically 11 years). Plus I already get a bit of a refund at tax time.
I'm trying to understand his thinking....and what you're saying lol...
***edit*** I cant add to the LIRA as its GROUP and I no longer work for Toromont.
CFD244 said:
I wouldn't sign up for either of those rates Steve. Hell, you can buy bank stock and make a 4% dividend. At those rates, you are not even keeping up with inflation, and there is probably some sort of "lock in".

You've got a lot more to think about.....Tax strategy being the biggest. We did RRSP's while we were working and in a high tax bracket. We took advantage of the tax savings at that time. Over the years, the value grew tax deferred until we retired (young). At that point, being on pension, we began withdrawing the max amount from our RRSP's while keeping our income at the top of the lowest tax bracket. That enabled us to pay the least amount of tax on the withdrawls. Wrote it off at max tax and took it out at min tax. Ironically, with pension sharing, we get all of the witheld tax back in May once our taxes are processed. So, our withdrawls are essentially "tax free". That money (from the RRSP withdrawl and the tax refund) goes straight into the TSFA where I manage good quality high dividend paying stock portfolio for tax free income in our golden years (56).
Click to expand...
 
Thanks Aaron, not a big $$ year, still hopeful tho lol. Yes the advisor mentioned $80k in a TFSA....NOT frickin likely lol.
By the time September rolls around I've maxed out on my deductions for CPP and EI. That's why I get "some" back at tax time. As I mentioned above I'm wondering why he said to not do rrsp....
jimjimjimmy said:
well if you had a big money year and want to save some income tax RRSP is good for that and you can get a nice growth over time .
TFSA your income tax is already paid because it's bought with taxed income and any money you make with it is tax free . the TFSA is up to 79500 i think and you can buy 6000 a year . what i do is buy RRSP to save on income tax and i invest my tax free in the stock market in good divident stocks . i made 36% on my RRSPs and 28% on my tax free last year .
Click to expand...
 
Check out this video.

This guy is pretty good at explaining the benefit of saving in a TFSA and RRSP.

You can self direct into riskier funds within a TFSA if you want a higher return.



 
RRSP comes outta payroll at source, before taxes, resulting in more money to invest. - Taxes are paid at time of withdrawal, win or lose.

TFSA you invest after taxes (30%ish less), but pay NO taxes at withdrawal.
 
Can you afford to invest in real estate ?
That's where I would put my money
 
RRSP...Registered Retirement Saving Plan
TFSA..Tax Free Savings Account

They are both tax free accounts...you buy different financial vehicles..stocks, GIC's, Trusts, Bonds or whatever and hold them in either of these accounts. Any profit in interest, shares, or any capital gains you enjoy are tax free.
Also, if you put $10,000 in your RRSP this year that is a $10,000 deduction and at a 50% tax bracket will net you an additional $5000 return from the government on this years taxes...nice!But...some day later when you take any money out of your RRSP you will pay income tax on it.
With TFSA the money is all yours to remove, spend invest without ever paying any tax.
I would consider them both Money Machines! Start using these tools at a young age (your 20's) and you will most certainly end up a millionaire by the time you're 60!
Tell your kids.
 
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Thanks guys, I know what they stand for and am familiar with RRSP'S. I've had those for quite a few years. @inertia I have a pension plan at work, but that's group, withdrawn from paycheck. And is a pension plan. Is that considered a RRSP? I just thought it was a PP.
Curious as to why advisor said to NOT get an RRSP? Any ideas?
I get the TFSA somewhat(thus the name) but curious the benefit one over the other?
inertia said:
RRSP comes outta payroll at source, before taxes, resulting in more money to invest. - Taxes are paid at time of withdrawal, win or lose.

TFSA you invest after taxes (30%ish less), but pay NO taxes at withdrawal.
Click to expand...

ir3333 said:
RRSP...Registered Retirement Saving Plan
TFSA..Tax Free Savings Account

They are both tax free accounts...you buy different financial vehicles..stocks, GIC's, Trusts, Bonds or whatever and hold them in either of these accounts. Any profit in interest, shares, or any capital gains you enjoy are tax free.
Also, if you put $10,000 in your RRSP this year that is a $10,000 deduction and at a 50% tax bracket will net you an additional $5000 return from the government on this years taxes...nice!But...some day later when you take any money out of your RRSP you will pay income tax on it.
With TFSA the money is all yours to remove, spend invest without ever paying any tax.
I would consider them both Money Machines! Start using these tools at a young age (your 20's) and you will most certainly end up a millionaire by the time you're 60!
Tell your kids.
Click to expand...
 
I think because of your age, how little time till retirement for you..
I found that after 30 yrs of bank directed "retirement/mutual funds" , I had less than I had put in.
I found that the fund managers make mosta the $$$, with very little going to the investor, like maybe 1%, seriously, - it's in the fine print.
Spent the last 25 yrs self directing the retirement fund into blue chip stocks, most with healthy dividends, and some just for fun .
Questions welcome. Pm me .
 
Steve..an RRSP contribution is an instant tax deduction..and you will get about half of the RRSP contribution back as a tax refund for the year.So invest $10,000 in your RRSP and will get around $5000.00 refund in cold hard cash this year! Now as i said, start in your twenties and you'll compound your gains tax free for 40 years until you are say..60. That's interest on principal and interest on principal and interest on principal and interest..........so long term is the key for both.
No tax deduction for TFSA just a place to make money tax free!
 
4spdragtop said:
s that considered a RRSP? I just thought it was a PP.
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That's what the "Pension adjustment box on your T4 is for. The govt. allows you to "write off" a certain amount of your income based on it's amount. The PA is the amount that you can RRSP over and above what you've put into the company plan. If you have no company plan, the PA would be higher. Basically, both amounts (RRSP and PP) come off of your "total income" to get you to "taxable income".

Give me a shout if you want to swap some ideas.
 
If one does not tax the withdrawals I would take into account that taxes will be going up.
 
The Governments have just fed, clothed, housed and supported it's citizens for 2 years, to think taxes wouldn't go up is absurd .
 
So reading through the posts a couple of things jump out.
First the refund on RRSP contributions is based on a lot of factors including your marginal tax rate based on province of residence.
If you are expecting a 50% refund you must be in a high tax bracket where your marginal tax rate is 50%.
More likely it will be 25-30%.
Consider taking that refund and put that amount in your TFSA. Tax free growth in either one is a matter of paying he taxman now or later. Most Canadians love the refund scenario but the hard thing is having the fortitude to not take your tax refund to buy stuff.
Withdrawing the TFSA at retirement is tax free and won't adversely affect CPP and OAS like RRSP withdrawals do (see clawback).
My advice would be to maximize TFSA contributions since you can carry forward unused contributions from previous years.
And if your group LIRA with Toromont earned 25% that's great! Leave it. But your FA can move it from one LIRA to another AFAIK but at that ROR why bother.
 
Here's how to take advantage of this .. Borrow $5000 add your own $5000 and contribute $10.000
Take your $5000 refund and pay back your $5000 loan.
You just turned $5000 into $10000! After 40 years of tax free growth you will be very wealthy!
The key is your investment choices. Watch out and watch it!
Tell your kids to start building wealth as soon as they enter the work force.
 
The saddest part Steve, you'll get better advise here on a car forum than you will from that Sun Life advisor !
 
It would be best if you never regretted that you didn't do something. History is cyclical, so the experience gained can be applied in the future when you can recognize a similar situation. I started doing cryptocurrency quite late compared to my friends. Despite this, I managed to achieve good results. I have carefully studied the financial literature, conducted market research, read the blog investorjunkie.com and gained experience. As a result, I have a good cryptocurrency wallet. It seems to me that I have matured in investing in stocks and trading.
 
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I am not a professional financial advisor; however.

RRSP's you get screwed at 65. You have to convert to GIC's . Then you have to withdraw a certain percentage every month, whic screws up your governemnt pensions. That is how i understood it.

Now if you end up in a old age home you will have to use up the GIC's before the government steps in to help finance your old age stay.

Also the rrsp route makes it tricky if your trying to plan your death because your beneficiary will have to pay the tax on the GIC before they get the cash. BIG OUCH!!!.

Now with a tax free you can add your beneficiary to the account and when you die or sign over. I believe they still get hit with tax.

Other option. Stuff the cash into a savings account with your beneficiary as secondary on the account. On your death (or signed over) the beneficiary basically takes over the account and will be free and clear without the tax man getting a piece of the pie because you already paid the tax. (Could also put them into 5 yr investments etc)

What i tell my parents, which my 4 sisters hate. SPEND ALL YOUR GOD DAMN CASH AND ENJOY LIFE. Cause thats what we will do with the cash you leave us.
 
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