Assumptions:
•OAS clawback applies to RRSP withdrawal of $4886 at a clawback rate of 15% which is $733 before tax or $498 after tax.
•Investment rate of return is 5% per year.
In this final scenario, Chance would receive more in retirement using a TFSA because there is a clawback of OAS to factor.
Ideally it would be great if you could tax advantage of both your RRSP and TFSA. The reality most Canadians can’t afford to.
If you must choose, you should consider your tax rate when contributions are made and your tax rate when you make your withdrawal(s). as well as the impact on any government income-rest benefits.
Lastly, what do we invest in? As I mentioned before you can invest in anything from a savings account to an individual stock. The thing you want to be aware of is your own risk and return objectives. This decision is important. Here are just a few examples of TFSA maximized every year and the difference return rates and time can make. Let me show you a million-dollar TFSA.
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