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Three friends, Jenna, Michael & Alice are debating whether an RRSP or a TFSA would be a better choice for them. Each of them is
Three friends, Jenna, Michael & Alice are debating whether an RRSP or a TFSA would be a better choice for them. Each of them is the same age eg years old and is saving for a goal that is years into the future retirement Jenna has an income of $ Michael has an income of $ and Alices income is $ After the target date, Jenna expects to have an income of $ Michael expects to be earning about the same and Alice expects to be earning $ Assume they planning to contribute $ and they face different income tax brackets based on their income levels. For example, the Federal Tax Rates for are as follows:
Federal tax rates for
on the first $ of taxable income, plus
on the next $ of taxable income on the portion of taxable income over up to $ plus
on the next $ of taxable income on the portion of taxable income over $ up to $ plus
on the next $ of taxable income on the portion of taxable income over up to $ plus
of taxable income over $
Provincially, the Ontario tax rates are as follows:
on the first $ of taxable income,
on the next $
on the next $
on the next $
on the amount over $
Assuming they use the tax refund generated from RRSP contributions to reinvest into their RRSP which vehicle would be the best choice for each Jenna, Michael and Alice? Assume they live in Ontario and will earn the same return eg percent in both vehicles. Identify any assumptions made. Your conclusions should focus on the reasons for selecting an RRSP or TFSA, including tax implications of a changing income level, and not just focus on calculations.
NOTE: All of the analysis provided by you must be your work and reflect your original thought. Do not provide any copypaste material, and do not reference or provide citations for other material. I want to receive your opinion, the results of your research and your thoughts.
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