Aug 22, 2024
Which account should you choose, a registered
retirement savings plan (RRSP) or a Tax-free savings account
(TFSA)? This is one of the most common decisions that Canadians
must make when it comes to investing, but it will also elicit some
of the most passionate responses. RRSPs especially get a lot of
undue skepticism, with some even labelling it as a scam. Today we
take a deep dive into both of these savings accounts, exploring the
downsides and benefits of each, and how to decide which account is
right for you based on your savings goals. With the help of
Conquest Planning, a specialized, in-depth modelling tool, we look
at a range of scenarios incorporating different variables, like
income and family size, and break down our analysis regarding the
RRSP vs. TFSA decision for each scenario. We discuss key factors to
consider, including the basic personal amount tax credit, which
allows RRSPs to act as a tax flow-through, and the guaranteed
income supplement (GIS), which can impact retirement planning. Our
conversation also examines how to approach family size and
longevity, as RRSPs become more advantageous with longer lifespans.
Join us today to learn about the benefits and flexibility of each
of these accounts, the surprising ways RRSPs often outperform
TFSAs, and find out which one is right for you!
Key Points From This Episode:
(0:00:20) An introduction to the RRSP vs. TFSA debate.
(0:08:11) How we used the Conquest Planning tool and the scenarios we analyzed.
(0:10:34) Taxation and contribution considerations and strategies for RRSPs and TFSAs.
(0:20:11) An analysis of scenario one; $60,000 income
and no children.
(0:22:38) Basic personal amount tax credit; how it allows RRSPs to
act as a tax flow-through.
(0:27:20) The Guaranteed Income Supplement (GIS) and its impact on RRSP vs. TFSA analysis in different scenarios.
(0:36:16) How GIS is tied to Old Age Security (OAS) payments.
(0:41:12) An analysis of scenario two; a couple with two children, and the impact of the Canada Child Benefit on RRSP vs. TFSA contributions.
(0:45:21) The impact of mortality and longevity on RRSP and TFSA in various scenarios.
(0:47:01) Main takeaways from today’s scenarios and the advice our hosts would give to different clients regarding TFSAs and RRSPs.
(0:50:50) Why RRSPs are of greater benefit if you live longer compared to TFSAs.
(0:52:13) Our aftershow section: listener feedback, what Ben is working on regarding renting versus buying, the zombie apocalypse, and more.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://x.com/RationalRemind
Rational
Reminder on TikTok — www.tiktok.com/@rationalreminder
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — info@rationalreminder.ca
Benjamin
Felix — https://www.pwlcapital.com/author/benjamin-felix/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP
Brady Plunkett on LinkedIn — https://www.linkedin.com/in/brady-plunkett-712489105/
Lukas Fleck on LinkedIn — https://www.linkedin.com/in/lukasfleck/
Flossing for your Finances, Personal Financial
Strategies for Dentists —
https://us06web.zoom.us/webinar/register/9017236574029/WN_7O_JdvejRhmh-_LleBNRmQ#/registration
Episode 317: Kevin Milligan — https://rationalreminder.ca/podcast/317
Papers From Today’s Episode:
‘Tax Uncertainty and Retirement Savings Diversification’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2799288