This was written in 2009 when the world was recovering. The Financial Crisis was still raging. I was still unemployed, so keep that in mind.
Larry MacDonald will be publishing a story about TFSAs and their newfound popularity, and for some odd reason, he is quoting me, so read your Globe and Mail and send me a note when the article gets published. I told Larry that given that I have little or no RRSP room left, thanks to my pension, the TFSA is the next logical choice for me to use as a savings vehicle. Otherwise, I get to pay the CRA more taxes on any Capital Gains or Interest I might earn on my savings/investments.
I still don’t have a definitive answer to whether you should put your money in an RRSP or a TFSA (if you can choose). Still, if you are in a high enough Tax Bracket, it might be good to put money in your RRSP. Still, the TFSA is after-tax money and thus a valuable vehicle to use for saving for the near future (where RRSP savings is a LONG term thing in my mind (unless you are as old as me, then it is the more immediate term)).
After last week’s articles, I will attempt to stay away from my former employer. A few folks have suggested that old unemployed former employees might not want to come off as twisted and bitter, especially if future employers find these commentaries online. Enough said on that topic.
An excellent place to get all the ideal info on Nortel is All About Nortel, and yesterday’s post about the Private Jet made my stomach turn (whoops, bitter and twisted alert). This blogger seems pretty tightly coupled to the inside scoop on Nortel.
Nortel related articles
- On Being Laid Off (a 10 year retrospective) what had I learned the 10 years after getting laid off.
- A Year Ago, written a year after that day I was laid off luckily I was waiting to start a new job
- Sometimes itâ€™s better to be lucky a retrospective about how lucky I was to get laid off when I did. Read on to find out why.
- Pensions and Severance an important topic I took from my layoff from Nortel.
- Twenty Years in One Line is what my severance letter did. My 20 years are summed up in a sentence.
- Financial Issues With Severance what do you do with your severance if you have options? If you get severance as well.
- On Being Laid Off my explanation of being laid off from Nortel, a day or two afterwards.
- Nortel Still Paying Out? Really, well not that much.
Larry Macdonald (in Canadian Business online) made a link to our web page that shows all the fees associated to the TFSA at banks etc. Diana has just updated it, and there is even a chart that shows the TFSA incentives that are being offered….
I haven’t opened my TFSA yet, but planning to do so with my tax refund (already maxed out my RRSP).
I like TFSA and its reusable room. Retirement is a little too far off right now, I prefer the immediate tax refund of RRSP. I have also started out with RESP, so there are a lot of special savings vehicle to take care of.
RRSPs give Canadians the option to income split more than $5k per year(assuming you have a spouse, RRSP contribution space and income differential).
If you have a great pension and retirement income and you anticipate that your tax rate in retirement will be just as high/higher than your pre-retirement tax rate, you will be heavily taxed on RRSP/RRIF withdrawals and TFSAs might be a better choice from that perspective.
I’m glad to hear you made it through the Nortel crisis. Its a blessing you were let go when you were eh?
When looking at the TFSA vs RRSP, consider this. The RRSP is a “retirement account” and you should consider it for your retirement plan. The TFSA is for everything else in your life: Saving for a new car, emergency fund, or a vacation. The TFSA gives you the flexibility to save for other things without tax implications.
The theory underlying the RRSP is that you will be in a higher income bracket before retirement and a lower income after. You can lower your taxable income now and include this deferred income to a later point in life. You can also use the RRSP as an income averaging tool (contribute when income is high and draw it off when income is low â€“ commission sales or self-employed persons benefit from this).
That said, I feel that you first must consider your retirement and contribute to an RRSP to meet that need. Then you use the TFSA to save for other things. All said and done, it makes more sense to contribute to an RRSP first, particularly if your income if high.
It’s odd to say, but yes I was lucky I was laid off when I was, because I have too many friends who are in a bad situation right now.