I contributed to both until retirement. Though it was impossible to max out on both. I still contribute to my TFSA monthly in retirement. But will never be able to max out. In retirement I ‘borrow’ from my TFSA as I would use my HELOC and try to put the money back in. My TFSA is my own personal financial institution.
Good info on this video. I've been fortunate as I've been able to max out my TFSA and RRSP. As you mentioned, I think of my TFSA is a lever, and as such I only have high quality dividend paying stocks in it. Currently, I'm earning close to $8K a year on those dividends and my plan is to set aside cash every year for large purchases, such as a roof, air conditioner, furnace, or car. This way, I can more easily budget for normal expenses.
Good video once again. I stopped my monthly contributions into an RRSP about 5 years ago and switched it to strictly TFSA. If i had contribution room for my RRSPs ( because i worked part-time) i would make a lump sum contribution. I currently have roughly $30,000 room to contribute into my TFSA to max it. Im starting CPP next month at 61 and will use those funds to max out my TFSA by the time i hit 65. I also have a solid amount of cash holdings in a high interest savings account. It may be wiser to top out my TFSA now with my current cash holdings and use CPP to maximize my TFSA each year for the next 4 years..but letting go of cash is hard.
When I first heard Adam talking about using the TFSA as a lever to smooth out tax planning in retirement, my head nearly popped off. It is pure brilliance. I have changed my retirement plan so that I keep building the TFSAs until age 75, and then start drawing down as necessary. Any unexpected or lumpy expense between 65 and 75 will come from the TFSAs and won't upset the tax apple-cart. RRSP meltdown + defer CPP + incorporate TFSA is SO compelling that I personally believe they should be LOWERING the RRIF conversion age to force people in the right direction. BTW... I know it was just an arbitrary example, but I found it hilarious that Adam thinks Mr TH-cam will find a new car for $20K in 5 years. A new car is going to start at $75K in 5 years 😛
Haha, used car...and I know, even $20k for that is tough. Appreciate you watching and glad the message and process hits home - I can confidently say it's a great way to walk through retirement.
@@garth217 Lower the RIF age to FORCE Canadians to start the meltdown. It's better for retirees, and it's better for the government (because they start to get that tax revenue sooner)
This is what I've been talking about. Nobody seems to be talking about it. Thank you. Though, if the government keeps going the way it has... guaranteed they'll find a way to tax it and punish us
Couldn't agree more. We stopped contributing to RRSP about 11 years ago and moved to maximizing cash into TFSA - now we are pretty much 50/50 in RRSP and TFSA accounts. These two accounts balanced 50/50 will serve us well during retirement as we manage retirement income from DB and DC pensions, OAS, CPP, & savings.
@@ybc8495it's about hard work, saving all your life, working two jobs to accomplish goals, getting education or whatever is needed in the evenings to open doors... nothing is handed to you - if you are physically and mentally able then do what is needed and in your words you too might be the next "Richman" 😮 A little luck 🍀 along the way or being in the right spot at the right time sometimes comes into play as well but lots of times hard work and determination pays off with some good fortune.
Building a TFSA as a retirement asset also makes the RRSP meltdown, something Adam has spoken to in previous videos, possible. Given these two types of investment account, with their complementary benefits and drawbacks, the retiree fortunate enough to have assets in both has much more tactical room to manage withdrawals and mitigate taxes. The capacity to make use of an RRSP meltdown, meaning withdrawing funds from your RRSP earlier and distributing your tax exposure along a longer time horizon, is an invaluable part of the retiree's financial repertoire.
Have been putting the max in my TFSA since they started it. It's a no-brainer, although I had the money in a no-brain "high interest" savings account for a few years. Just wish I could put more in it. Tax free growth and withdrawals. And you can put the money you take out back in (the next year).
The delay in CPP will get you $1500 after tax . Think of it this way: a delay of 5 years has a return of $4.11/ day. $28.77 / week or $115.07 a month. Can you use that money more in your early retirement at 60 to 70 or later when you slow down.
@DrivingPhilippines Adam is never wrong with his math, it is more money, but it's more money when you need less. I start my CPP next month at 61. 10,000 per year. With pension, RRSPs and then OAS , TFSA and cash it's enough
@wrongwayconway I retired at 54. DB Pension of 60%, close to 80k. 1/4 million in RRSPs, close to that in cash under 100k in TFSA . I'm taking CPP at 61 because I need less income not more. Slowly taking my RRSPs for the same reason. OAS clawback is my concern. I find it offensive when people say if your in clawback income you don't need it. I worked hard and paid my taxes on that income, I want my share back. To those people who think I should just pay and be quiet, I say cut OAS entirely then, or base it on Taxes paid over 40 years just like CPP is contributions based.
Another great video Adam! I always look forward to watching a new video you produce. Thank you, I have learned so much from you 😊. When the TFSA was introduced in 2009, I contributed the maximum and have done so every year. It is a component of my retirement income, along with other income streams.
It is all about the tax savings. Thanks to TFSA and savings accounts rolling through my retirement plan, my average tax rate is 12% (single person), while melting down my pension and RRSP in a tax-efficient manner. I can live with that compared to the almost 30% I am paying during employment!
Any suggestions for Americans living in Canada? My accountant does not suggest TFSA due to them being taxable in the US and the ROTH being taxable in Canada.
Couldn't Canadians selling their home to downsize in retirement quickly fill up the cumulative amount in their respective TFSAs? Something like $95,000 in 2024.
@@ParallelWealth And to be clear, I'm certainly not arguing against an earlier start with a TFSA when possible. Personally I have tried a balanced approach, using an RRSP, TFSA, and trying to own the one and only house we've ever had as quickly as possible. Thank you for your informative and helpful videos.
Thank you! I am 58, planning to retire at 60 with almost 0 TFSA. But I expect an inheritance in the future and I am keeping all that contribution space for that. Does that make sense?
The TFSA is a great investment tool, specifically if it is tax free money ( inheritance) . But one thing is that they do fluctuate in returns no matter what it's portfolio comprises of. My 2 cents don't put all of your money into it. GICs and high interest savings accounts are also good, but you will pay taxes on them. The market has improved in the last year since Covid and is steady. My TFSA didn't do great the last 4 years, but now I'm getting about 10%.
very informative. glad i have the TFSA maxed out. one question i had regarding CPP and retirement that i have never heard discussed was... if you retire lets say at 55 and your only income is from your RRSP do you need to make CPP contributions with your RRSP income? and if you do is it x2 like a self employed Canadian? (making both the worker and business contribution)
@@garth217 ahh, looking more into the RRSP withdrawal it may be necessary to convert some of it to an RRIF to mark it as retirement income or can you simply withdraw it from the RRSP without changing it or part of it to an RRIF? or am i out to lunch?
@@TechPeasant404you can do it either way, money withdrawn is taxable all the same but reported differently on your tax return. If you are over 65 there are credits you can claim when withdrawing it from a RRIF. There may also be additional admin fees at your institution for deregistering RRSP and lower or no fees when money comes out from your RRIF.
The TFSA is a great entity. With burgeoning government debt and unfunded liabilities, will a future government feel compelled to tamper with the tax free provisions? The answer to that is beyond my pay grade.
@@scottthompson3493 Yes, in other words, the conservatives were saying they wanted people to work hard and have a vehicle to drag themselves up by their bootstraps. Ya woulda thunk they'd win the subsequent election with a landslide. Socialism is warm and fuzzy but just doesn't deliver in reality re Venezuela, et al.
Hello Adam, I recently had a TFSA GIC matured, instead of reinvesting the amount plus interest to the same term, my financial institution credited the entire amount to my saving account, since I do not need to use the money right away and my TFSA limit already topped up this year. Would it be best to hold onto the money and wait until next year to put this money back to my TFSA account? Thank you in advance. Chris.
I know, it did not make sense to me either, I saw the mistake and pointed out to them, however, I did want them to simply fixed the mistake by putting the money back to my TFSA account because I already topped up my TFSA room this year.
I would get this fixed ASAP. However, even if they won't do it, you can put all of it back in on Jan 1 as they will have recorded it as a withdraw. You may also want to look for a bank that is competent.
I like a 50/50 ratio - I find it gives me the greatest amount of flexibility to massage taxable income each year but I'm sure the ratio should depend upon your situation, how much retirement savings you have and how much other income you will be reporting each year in retirement and your cash flow needs year to year.
@@Supe063 I loaded up on RRSP through the first 2/3rds of my working years and then generally stopped RRSP and moved to maximize our TFSAs in the last 1/3rd of our working career. Now a few years into retirement we have got to balanced by RRSP/RRIF withdrawals and deposits back into open/TFSA accounts. No worry about OAS clawbacks as long as we are both living to be able to meltdown RRSP over the next 10-15 years. We will continue to max TFSA each year for sure and probably some open investments as well as some RESPs for grandchildren as funds come available.
@@DoneByD... Many paths to the ultimate goal of getting to the max contribution allowed in TFSA. It's the mechanics of getting there as tax-efficiently as possible, before and after retiring. Nice work!
I think it is dangerous to advise people to not max out their RRSP first - assuming they expect to be in a lower tax bracket in retirement. Yes, it will be taxed later. As will the growth. But if I had $32K RRSP room and only $32 in cash to save, are you suggesting people put $7K in the TFSA and the rest in the RRSP? I would rather max out the RRSP and then put $7K of my tax refund in to my TFSA.
I retired in 2023 at age 58. I am receiving a defined benefit pension plan which i use to pay all my yearly expenses. When I was working, I maxed out my RRSP contributions which were severely limited because I was a participant in a defined benefit employer matched pension plan. Before I retired, I topped up my TFSA too. Now what I am doing is each year, starting in 2024, is drawing down my small $70,000.00 non-registered investment stock portfolio and converting a portion of the non-registered stock to being held within my TFFSA - $7,000.00 for tax year 2024. By age 65, depending on how my non-registered investments do, I should be able to keep my non-registered investments hovering around $70,000.00 while using the annual capital gain to keep adding to and keeping myTFSA topped up each year. Once I hit 65, I can then decide whether to take or defer CPP and OAS until age 70. Most likely, I’ll take OAS at 65 but delay CPP til 70.
For those born 1962 and later OAS is for sure moved to 67 years old...1959-1961 is transition period... So looks like your OAS is affected and is not at 65...you are doing well wonder you didn't have this info...
@@rsgrsg951 the move to 67 was repealed and those eligible for OAS can currently take OAS anywhere between the ages of 65-70. Who knows if this will change in the future but the rules as they exist today Sep 2024 is as above (anytime between age of 65-70 inclusive).
I contributed to both until retirement. Though it was impossible to max out on both. I still contribute to my TFSA monthly in retirement. But will never be able to max out.
In retirement I ‘borrow’ from my TFSA as I would use my HELOC and try to put the money back in. My TFSA is my own personal financial institution.
Good info on this video. I've been fortunate as I've been able to max out my TFSA and RRSP. As you mentioned, I think of my TFSA is a lever, and as such I only have high quality dividend paying stocks in it. Currently, I'm earning close to $8K a year on those dividends and my plan is to set aside cash every year for large purchases, such as a roof, air conditioner, furnace, or car. This way, I can more easily budget for normal expenses.
3rd exmaple of Richman MAX out both 8K dividend!
Good video once again. I stopped my monthly contributions into an RRSP about 5 years ago and switched it to strictly TFSA. If i had contribution room for my RRSPs ( because i worked part-time) i would make a lump sum contribution. I currently have roughly $30,000 room to contribute into my TFSA to max it. Im starting CPP next month at 61 and will use those funds to max out my TFSA by the time i hit 65. I also have a solid amount of cash holdings in a high interest savings account. It may be wiser to top out my TFSA now with my current cash holdings and use CPP to maximize my TFSA each year for the next 4 years..but letting go of cash is hard.
@garth217 you should me maxing both
When I first heard Adam talking about using the TFSA as a lever to smooth out tax planning in retirement, my head nearly popped off. It is pure brilliance. I have changed my retirement plan so that I keep building the TFSAs until age 75, and then start drawing down as necessary. Any unexpected or lumpy expense between 65 and 75 will come from the TFSAs and won't upset the tax apple-cart.
RRSP meltdown + defer CPP + incorporate TFSA is SO compelling that I personally believe they should be LOWERING the RRIF conversion age to force people in the right direction.
BTW... I know it was just an arbitrary example, but I found it hilarious that Adam thinks Mr TH-cam will find a new car for $20K in 5 years. A new car is going to start at $75K in 5 years 😛
@neilbertram1922 why lower the RIF age, you can withdraw from your RRSPs at any time. I just did
Haha, used car...and I know, even $20k for that is tough. Appreciate you watching and glad the message and process hits home - I can confidently say it's a great way to walk through retirement.
@@garth217 Lower the RIF age to FORCE Canadians to start the meltdown. It's better for retirees, and it's better for the government (because they start to get that tax revenue sooner)
This is what I've been talking about. Nobody seems to be talking about it. Thank you. Though, if the government keeps going the way it has... guaranteed they'll find a way to tax it and punish us
Couldn't agree more. We stopped contributing to RRSP about 11 years ago and moved to maximizing cash into TFSA - now we are pretty much 50/50 in RRSP and TFSA accounts. These two accounts balanced 50/50 will serve us well during retirement as we manage retirement income from DB and DC pensions, OAS, CPP, & savings.
another example of Richman, they have everything.
@@ybc8495it's about hard work, saving all your life, working two jobs to accomplish goals, getting education or whatever is needed in the evenings to open doors... nothing is handed to you - if you are physically and mentally able then do what is needed and in your words you too might be the next "Richman" 😮
A little luck 🍀 along the way or being in the right spot at the right time sometimes comes into play as well but lots of times hard work and determination pays off with some good fortune.
Building a TFSA as a retirement asset also makes the RRSP meltdown, something Adam has spoken to in previous videos, possible. Given these two types of investment account, with their complementary benefits and drawbacks, the retiree fortunate enough to have assets in both has much more tactical room to manage withdrawals and mitigate taxes. The capacity to make use of an RRSP meltdown, meaning withdrawing funds from your RRSP earlier and distributing your tax exposure along a longer time horizon, is an invaluable part of the retiree's financial repertoire.
Have been putting the max in my TFSA since they started it. It's a no-brainer, although I had the money in a no-brain "high interest" savings account for a few years. Just wish I could put more in it. Tax free growth and withdrawals. And you can put the money you take out back in (the next year).
The delay in CPP will get you $1500 after tax . Think of it this way: a delay of 5 years has a return of $4.11/ day. $28.77 / week or $115.07 a month. Can you use that money more in your early retirement at 60 to 70 or later when you slow down.
Finally somebody shows some numbers! Thanks! Personally I'll get my CPP at 60, and forgo the $1500 annually compared to taking it later.
@DrivingPhilippines Adam is never wrong with his math, it is more money, but it's more money when you need less. I start my CPP next month at 61. 10,000 per year. With pension, RRSPs and then OAS , TFSA and cash it's enough
Same here! I took CPP at 62, retiring in November with a defined pension plan, (RRSP, TFSA GIC, TFSA, totaling 120K) I'm going to take OAS at 65.
@wrongwayconway I retired at 54. DB Pension of 60%, close to 80k. 1/4 million in RRSPs, close to that in cash under 100k in TFSA . I'm taking CPP at 61 because I need less income not more. Slowly taking my RRSPs for the same reason. OAS clawback is my concern. I find it offensive when people say if your in clawback income you don't need it. I worked hard and paid my taxes on that income, I want my share back. To those people who think I should just pay and be quiet, I say cut OAS entirely then, or base it on Taxes paid over 40 years just like CPP is contributions based.
Another great video Adam! I always look forward to watching a new video you produce. Thank you, I have learned so much from you 😊. When the TFSA was introduced in 2009, I contributed the maximum and have done so every year. It is a component of my retirement income, along with other income streams.
this is an example of Richman see the word MAX every year.
Great to hear!
It is all about the tax savings. Thanks to TFSA and savings accounts rolling through my retirement plan, my average tax rate is 12% (single person), while melting down my pension and RRSP in a tax-efficient manner. I can live with that compared to the almost 30% I am paying during employment!
I maxed out both. I wish my TFSA was bigger than my RRSP.
But Mr. YTube would not take 20K$ he would take a loan for the car and not have to touch the RRIF, no?
Great video as usual.
No. Why take a loan at 9% for a car when you can use your own money
Not if the car loan is at 9%!
Any suggestions for Americans living in Canada?
My accountant does not suggest TFSA due to them being taxable in the US and the ROTH being taxable in Canada.
1st to comment..great video Adam
Couldn't Canadians selling their home to downsize in retirement quickly fill up the cumulative amount in their respective TFSAs? Something like $95,000 in 2024.
Sure could, and many do.
@@ParallelWealth And to be clear, I'm certainly not arguing against an earlier start with a TFSA when possible. Personally I have tried a balanced approach, using an RRSP, TFSA, and trying to own the one and only house we've ever had as quickly as possible. Thank you for your informative and helpful videos.
Thank you! I am 58, planning to retire at 60 with almost 0 TFSA. But I expect an inheritance in the future and I am keeping all that contribution space for that. Does that make sense?
The TFSA is a great investment tool, specifically if it is tax free money ( inheritance) . But one thing is that they do fluctuate in returns no matter what it's portfolio comprises of. My 2 cents don't put all of your money into it. GICs and high interest savings accounts are also good, but you will pay taxes on them. The market has improved in the last year since Covid and is steady. My TFSA didn't do great the last 4 years, but now I'm getting about 10%.
Sure it makes sense. It's investing in your future, unlike squandering on women.
@@726HARPAZO - As someone close to that age, the only woman I could squander it on would be my wife. Divorce is rather expensive.
@@ColdRunnerGWN Women are like sports cars - nothing but trouble.
@@garth217 You can hold GICs inside your TFSA.
I’m single, I’m doing the best that i can with my income.
very informative. glad i have the TFSA maxed out. one question i had regarding CPP and retirement that i have never heard discussed was... if you retire lets say at 55 and your only income is from your RRSP do you need to make CPP contributions with your RRSP income? and if you do is it x2 like a self employed Canadian? (making both the worker and business contribution)
Wondering same
no cpp contributions in this scenario
You pay CPP on employment income. RRSP is a retirement income. Both are taxable
@@garth217 ahh, looking more into the RRSP withdrawal it may be necessary to convert some of it to an RRIF to mark it as retirement income or can you simply withdraw it from the RRSP without changing it or part of it to an RRIF? or am i out to lunch?
@@TechPeasant404you can do it either way, money withdrawn is taxable all the same but reported differently on your tax return.
If you are over 65 there are credits you can claim when withdrawing it from a RRIF.
There may also be additional admin fees at your institution for deregistering RRSP and lower or no fees when money comes out from your RRIF.
The TFSA is a great entity. With burgeoning government debt and unfunded liabilities, will a future government feel compelled to tamper with the tax free provisions? The answer to that is beyond my pay grade.
The limit was $10000 under the last Conservative government, just sayin
I think that tampering with it would be political suicide. Harper lost a lot of votes because he wanted to raise the OAS age from 65 to 67.
@@scottthompson3493 Yes, in other words, the conservatives were saying they wanted people to work hard and have a vehicle to drag themselves up by their bootstraps. Ya woulda thunk they'd win the subsequent election with a landslide. Socialism is warm and fuzzy but just doesn't deliver in reality re Venezuela, et al.
@@726HARPAZO couldn’t agree more👍
@@scottthompson3493the conservative government started the tfsa program. Just sayin
Hello Adam, I recently had a TFSA GIC matured, instead of reinvesting the amount plus interest to the same term, my financial institution credited the entire amount to my saving account, since I do not need to use the money right away and my TFSA limit already topped up this year. Would it be best to hold onto the money and wait until next year to put this money back to my TFSA account? Thank you in advance. Chris.
Why did your bank not credit the TSFA instead of your Saving account? Does not make sense to me.
I know, it did not make sense to me either, I saw the mistake and pointed out to them, however, I did want them to simply fixed the mistake by putting the money back to my TFSA account because I already topped up my TFSA room this year.
@@CC-ik6us Yeah they need to fix that, that money should stay in your TFSA.
I would get this fixed ASAP. However, even if they won't do it, you can put all of it back in on Jan 1 as they will have recorded it as a withdraw. You may also want to look for a bank that is competent.
Thank you very much for your help!
I’m assuming the $50K example in the TFSA is capital gains/dividend growth above what was added to the account (after tax contributions) ?
Not a fan of RRSP whatsoever
Is there a good ratio of RRSP to TFSA?
I like a 50/50 ratio - I find it gives me the greatest amount of flexibility to massage taxable income each year but I'm sure the ratio should depend upon your situation, how much retirement savings you have and how much other income you will be reporting each year in retirement and your cash flow needs year to year.
I have 2.5 X more in RRSPs vs TFSA
@@DoneByD .. my "ratio" is to load up in the RRSP all year, take the tax refund and fill up the TFSA with it.
@@Supe063 I loaded up on RRSP through the first 2/3rds of my working years and then generally stopped RRSP and moved to maximize our TFSAs in the last 1/3rd of our working career. Now a few years into retirement we have got to balanced by RRSP/RRIF withdrawals and deposits back into open/TFSA accounts. No worry about OAS clawbacks as long as we are both living to be able to meltdown RRSP over the next 10-15 years. We will continue to max TFSA each year for sure and probably some open investments as well as some RESPs for grandchildren as funds come available.
@@DoneByD... Many paths to the ultimate goal of getting to the max contribution allowed in TFSA. It's the mechanics of getting there as tax-efficiently as possible, before and after retiring. Nice work!
I think it is dangerous to advise people to not max out their RRSP first - assuming they expect to be in a lower tax bracket in retirement. Yes, it will be taxed later. As will the growth. But if I had $32K RRSP room and only $32 in cash to save, are you suggesting people put $7K in the TFSA and the rest in the RRSP? I would rather max out the RRSP and then put $7K of my tax refund in to my TFSA.
I retired in 2023 at age 58. I am receiving a defined benefit pension plan which i use to pay all my yearly expenses. When I was working, I maxed out my RRSP contributions which were severely limited because I was a participant in a defined benefit employer matched pension plan. Before I retired, I topped up my TFSA too. Now what I am doing is each year, starting in 2024, is drawing down my small $70,000.00 non-registered investment stock portfolio and converting a portion of the non-registered stock to being held within my TFFSA - $7,000.00 for tax year 2024. By age 65, depending on how my non-registered investments do, I should be able to keep my non-registered investments hovering around $70,000.00 while using the annual capital gain to keep adding to and keeping myTFSA topped up each year. Once I hit 65, I can then decide whether to take or defer CPP and OAS until age 70. Most likely, I’ll take OAS at 65 but delay CPP til 70.
For those born 1962 and later OAS is for sure moved to 67 years old...1959-1961 is transition period... So looks like your OAS is affected and is not at 65...you are doing well wonder you didn't have this info...
@@rsgrsg951that change was cancelled. OAS eligibility remains 65. For many, deferring to 70 is a good decision.
@@rsgrsg951 the move to 67 was repealed and those eligible for OAS can currently take OAS anywhere between the ages of 65-70. Who knows if this will change in the future but the rules as they exist today Sep 2024 is as above (anytime between age of 65-70 inclusive).