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TFSA, RRSP Decision Tricky

Deciding whether to use Tax Free Savings Accounts (TFSAs) or Registered Retirement Savings Plans (RRSPs) to save retirement can be tricky, says David Chilton, author and panelist on the ‘Dragon’s Den.’ In the plenary session `The Wealthy Barber Returns` at the ‘2012 CPBI Ontario Regional Conference,’ he said both have advantages and drawbacks. The RRSP clawback rules make it difficult to plan for retirement savings 20 years away because `who knows` what the rules will be then. However, because of the tax considerations, it can be more difficult to withdraw money from an RRSP which makes it a more secure way to save for retirement. With TFSAs, it is easy to take the money out since the tax is already paid making it a challenging way to save for retirement, especially for young people. However, the key variable between the two is the tax value at retirement. Higher wage earners would benefit more from money saved in a TSFA while low wage earners can realize a greater benefit by using an RRSP.

Courtesy of Benefits and Pensions Monitor website News Alerts


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