Q: My husband and I participate in workplace RRSP top-up programs, and we have an RRSP loan to maximize my husband’s RRSP contribution. We’re not sure if this is a good plan, especially considering we’re nowhere near maxing out our annual mortgage contributions or TFSAs.”—Vanessa McCubbing Saskatoon, Sask.
A: Group retirement plans tend to have matching contributions from employers. Investment options are usually good, primarily due to fees being lower than what you’d pay on retail investments. So this is where your primary focus should likely be.
I wouldn’t be worried about your TFSAs if you have RRSP room. RRSPs are likely a better choice than TFSAs for most people, unless you’re in a low tax bracket, close to retirement or may need some of your savings in the short term.
I’m on the fence about the TFSA versus mortgage debate. Studies have shown that the vast majority of TFSA investments in Canada are in savings accounts and GICs. Even a balanced portfolio, if invested in high-fee mutual funds, might have a hard time—net of fees—beating the guaranteed return from debt repayment.
In short, maxing out your group RRSPs is probably the right way to go. And unless you’re comfortable with and willing to take some risk in your TFSAs, mortgage repayment is your next best bet.
Jason Heath is a Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto.