# RRSP or not? Maxed out TFSA. Makes \$40K at 25, \$50K at retirement. Withdraw the minimum RRIF %

The authors (Ted Rechtshaffen MBA York University CFP CIM and Erica Alini) failed to state Joe's balance sheet clearly. But I emailed Erica and she clarified that Joe

1. is not withdrawing the minimum percentage from his RRIF.

2. hasn't maxed out his TFSA.

Global News disadvises RRSPs for Joe, someone who

starts working at 25 making \$40,000 a year. Based on his income, Joe would get a 20.05% tax refund on RRSP contributions in Ontario. Let’s assume that his earnings remain fairly steady but grow slightly more than inflation throughout his working life and that he’ll need roughly the same amount of money pre- and post-retirement to cover his expenses. If at retirement his income is an inflation-adjusted \$50,000, this would be taxed at 29.65%, assuming no tax changes. The RRSP tax teeter-totter isn’t working in Joe’s favour. At age 90, he would have been over \$400,000 better off investing in a TFSA, assuming identical returns on investment in the two accounts, calculates Rechtshaffen.

Even if Joe remained in the 20.05% tax bracket in retirement, an RRSP wouldn’t offer him a tax advantage. His teeter-totter would be flat, with money coming out taxed at the same rate as the money he put in. Worse, Joe’s RRIF withdrawals would likely push him above the income threshold for the Guaranteed Income Supplement (GIS) that is available to many low-income retirees. If Joe took his retirement income from a TFSA, on the other hand, the government wouldn’t count that as income, meaning the money would have no impact on his benefit eligibility.

What's the answer — whether to open RRSP — if we "invert" assumptions 1 and 2? Thus consider Zoe, who's exactly like Joe, barring that Zoe

1. WILL withdraw the minimum percentage from her RRIF.

2. HAS maxed out her TFSA.