RRSPs make great “cents” if you manage the refund
It’s easy to explain why:
- Contributions to the TFSA are not tax deductible but account withdrawals are tax-free,
- Investments held inside the TFSA grow tax-free,
- There is no upper age limit for TFSAs.
This doesn’t mean Registered Retirement Savings Plans (RRSPs) should be avoided, on the contrary, invest in them where you can!
Just be very mindful of managing the RRSP-generated tax refund.
RRSPs really only make great “cents” if you manage the refund 🙂
Last year I wrote this:
Managing the RRSP refund is the linchpin in the battle of the retirement savings accounts RRSP vs. TFSA.
You don’t have to take my word for it.
In a recent article David Chilton, The Wealthy Barber himself, mentioned this:
“If you’re going to put money in a registered retirement savings plan and “blow the refund on something stupid,” then a major advantage of the RRSP – the immediate tax benefit – is lost, he says.”
Perfectly and bluntly put!
Using RRSPs as part of your retirement plan can make great “cents” for almost every investor but it’s the RRSP-generated tax refund that you need to save and/or ideally reinvest.
What do you usually do with your RRSP-generated tax refund?