I wrote a column last month with the headline "RRSPs are getting a bum rap as a tax trap." It was about some research by Jamie Golombek, managing director of tax and estate planning at Canadian Imperial Bank of Commerce, showing that registered retirement savings plans are a vital savings tool that do not disadvantage most users from a tax point of view.
On the day that column was published, Mr. Golombek called me to marvel at how people he'd spoken to continued to disparage RRSPs. I replied by saying that most of the reader e-mails I received regarding that column heaped further abuse on RRSPs.
TFSAs are a different matter. People love them to pieces, even if RRSPs are sometimes are a more ideal savings vehicle. To ensure you're making a sound choice between the two, check out the column I mentioned earlier and then take a look at how TFSAs and RRSPs compare in a wide variety of ways, including taxation, investment options, withdrawals and spousal contribution options.
People with a low income are likely to be best off using TFSAs only and not RRSPs. Most others will probably end up using both. The trick is to know which to use at each stage of life.
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Rob's personal finance reading list…
The case for not using a will kit
I'm a big DIY booster, but I would never use a will kit to save money on legal fees. This article from a publication for financial advisers meshes with my own thinking on the importance of getting a will done right.
How to avoid getting sick while travelling
Tips on eating, drinking and, of course, hand-washing. Presented as a way to ensure you get the best value for your travel dollars.
The hidden benefits of living in a tiny space
A man raising five kids in a three-bedroom Vancouver condo says the benefits of having access to downtown amenities more than offsets the lack of space.
Tips for retirees on using TFSAs
A good rundown on how TFSAs can work well for seniors. A key point here is that TFSA withdrawals don't affect your eligibility for Old Age Security and the Guaranteed Income Supplement.
The question: "I started taking CPP at age 60 on the advice of an adviser. It turns out that I really don't need the money now and may be better off if I could stop the payments and start again when I am 70. Do you know if this is even possible."
The answer: Here's the answer to this question I received from Employment and Social Development Canada: The Canada Pension Plan allows an individual to cancel their retirement within six months of the date that they started receiving it. Cancelling the benefit doesn't only stop payments; instead, it resets the individual to a state as if they had never applied or received the retirement pension. Such an individual would be able to apply for their retirement pension at a later date. However, because the individual is restored to a state of never having applied for their pension, they are required to reimburse the amount of the retirement pension they received as part of the cancellation process.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length.
What I've been writing about
- Full CPP benefits are a tough goal to reach
- Millennials, don’t make the retirement-wrecking mistake of avoiding stocks
- Set it and forget it: Four strong balanced fund contenders for your RRSP (for Globe Unlimited subscribers)
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