Where to start saving: RRSP or TFSA?

Audio: Malcolm Hamilton on whether to save inside a TFSA or RRSP.

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Hamilton_Chevreau_2_322As mentioned last week, I recently taped a long interview with Mercer principal Malcolm Hamilton to talk about financial independence and how it relates to retirement. With fewer and fewer Canadians enrolled in traditional employer-sponsored Defined Benefit pension plans, the onus is on workers to make up the difference by saving in registered plans like the half-century old RRSP program, or the new Tax Free Savings Accounts launched in 2009. This doesn’t have to be an either/or choice although some Canadians earning capacity means that in practice they may have to choose just one or the other. Which one may depend on your age and income level, Hamilton says.

Q: If you’re not earning enough to contribute to both RRSPs and TFSAs, which should you take precedence?

A: Press play to hear Hamilton’s response:

      Where-to-save-TFSA-or-RRSP.mp3|titles=Where to start saving: RRSP or TFSA?

6 comments on “Where to start saving: RRSP or TFSA?

  1. I am glad to hear that the TFSA should come first; I think it is a great program and Canadians should definitely be taking advantage of it.

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  2. If you're not saving enough to fill the $5K room in a TFSA annually *and* conrtibute to your RRSP, then you're certainly not on your way to "financial independence". (Which means, you have enough saved so you don't have to work at all if you don't want to.) I think there are too many articles on the Net which ask "which" should a person put money into when the simple answer is: both!! $5,000 in a TFSA alone a year just isn't enough.

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    • That depends when you've started. A 25 year old contributing $200 biweekly ($5200 a year) has over $1.5 million at age 65 assuming an 8% annual return.

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      • An 8.00% rate of return is not achievable over the long run.A 4.00% to 5.00% rate of return is more realistic.You would have to save about $14,000 in TFSA's,RRSP's a year and at a 32.00% tax bracket would give a $2,080 income tax refund so really an out of pocket $11,920.This is all using annual contributions of $5,500 TFSA,$6,500 RRSP plus a $2,080 annual income tax refund and all this money earning 4.50% a year for 40 years.

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  3. the audio link doesn't work….tried a couple of times hitting refresh button

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    • Hi Maria,
      Do you have the most recent version of your browser + plugins installed on your computer? There doesn't seem to be a problem with the .mp3 file. Thanks for reading and sorry you are experiencing trouble.

      Reply

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