Term deposits (ie CDs) might be an alternative? On the basis that at some point the Bank of Canada will cut rates and that 4-5% will disappear (yield curve is currently inverted and that is not it's normal shape).TFSA is roughly a Roth IRA and RRSP is roughly a 401k.
Until school is settled, I would not bother with either one. Keep your money in a HYSA or Money Market fund paying 4 to 5 percent. Unlike a Roth IRA, the TFSA contribution room does not disappear if not used, so you can double down on your TFSA when you get your career and income settled. Likewise, the benefit of an RRSP is lowering your taxes and getting matching contributions. Your current tax rate does not make an RRSP appealing. If I am not mistaken, I think RRSP contribution room also grows if not used, so you can save it for when you are making a higher income and can benefit from the tax deduction.
It's been a long time for me on RRSPs.
But I thought there was an annual allowance, but with some carryback? Annual allowance based on your income. But you can use unused annual allowance (but still only up to your current annual allowance) from previous years? Anyways that's how I (vaguely) remember it.
RRSP is great. I look at what mine has compounded to be nearly 40 years later. But it's quite inflexible in terms of accessing it. It's really only when one is settled into a career that RRSP saving kicks off - and then it's always a tradeoff against saving for a house downpayment (I would reckon, in urban Canada now, you are going to need a $100k-250k downpayment for your first home, which is just a huge hurdle for young people who do not have access to parental financial resources).
Statistics: Posted by Valuethinker — Fri Jul 19, 2024 6:17 am — Replies 4 — Views 235
