Explain why it is often more beneficial for people with low incomes to save for retirement in a TFSA instead of an RRSP.

For each option below, decide whether a TFSA or RRSP would be more appropriate and explain why

(a) You earn $11,000 of income and want to save some money for either retirement or to buy a house in five years.

(b) You earn $40,000 and want to save for a house purchase likely to occur in about four years.

(c) You earn $125,000 and want to save for retirement.

(d) You earn $80,000, are part of a defined benefit pension plan, and want to save more for your retirement.

Agnes is 40 years old. She wants to know how much she should be saving each year for retirement. Below are the specifics:

• She wants to retire at 60 and expects to live until she's 90
• She currently makes $45,000 and expects that to increase each year with inflation (2%). She thinks she will need about 70% of that to live on in retirement.
• She has $40,000 in an RRSP
• Her investments are earning a real rate of 7%
• When she retires she will move her investments into a more conservative portfolio and earn 3% per year.
• She expects that CPP will be about $15,000 per year.

How much will she have to save each year to make up the difference?

Agnes is 40 years old. She wants to know how much she should be saving each year for retirement. Below are the specifics:

• She wants to retire at 60 and expects to live until she's 90
• She currently makes $45,000 and expects that to increase each year with inflation (2%). She thinks she will need about 70% of that to live on in retirement.
• She has $40,000 in an RRSP
• Her investments are earning a real rate of 7%
• When she retires she will move her investments into a more conservative portfolio and earn 3% per year.
• She expects that CPP will be about $15,000 per year.

Given this information, how much will she have saved when she is 60?

Agnes is 40 years old. She wants to know how much she should be saving each year for retirement. Below are the specifics:

• She wants to retire at 60 and expects to live until she's 90
• She currently makes $45,000 and expects that to increase each year with inflation (2%). She thinks she will need about 70% of that to live on in retirement.
• She has $40,000 in an RRSP
• Her investments are earning a real rate of 7%
• When she retires she will move her investments into a more conservative portfolio and earn 3% per year.
• She expects that CPP will be about $15,000 per year.

How much does she need to have saved at the time she retires?

Assume your gross pay per pay period is $2,400 and you are in the 26 percent tax bracket (ignore provincial tax). Calculate your net pay and spendable income in the following situations:

a.You save $200 per pay period in a TFSA after paying income tax on $2,400.

Spendable Income$

b. You save $200 per pay period in an RPP.

Spendable Income$