I was having a discussion with a friend giving her some financial advice about saving money and where to allocate it so these are ballpark the numbers we're talking about here. I said she should wait it out for a few years but she asked me post it to my 'forum guys and see what they said'
That's the question, yes. The point is more about tucking it away now and getting a small tax return, or waiting 2-3 years and getting a bigger tax return. The income amount is right on the cusp of the next brackets. For example up to $40K is 20%, then $40-45K is 25%, then $45+ is 30%. More or less. So is it better to lower income from $45K to $40K by contributing $5K in year one and get back 5% incrimentally, or wait until the salary is say $50-60K in 2-3 years and then contribute $10-15K to get back a full 10%.
Originally Posted by jbarwick
With the example given, it sounds like you get a guaranteed 5% return versus whatever the market returns. That is up for you to decide but last year I had maybe a 1% return vs this year which is currently over 5% but it is not under my control.
I can get the guaranteed 5% return by putting it into RRSP AND whatever the market returns on top of that. The question is more about should I wait for longer until my income is higher to make these contributions?
Originally Posted by Piobaire
In all seriousness, you're talking a few hundred bucks, so do what you feel is correct and don't worry about it. If anything I'd view what the compounded extra year's of returns might end up being and go that way.
Yes, sort of. I'm using these numbers as examples. The actual numbers might be saving $5K now and each year versus accumulating $15-20 in a non-registered and transferring it in 3 years to an RRSP when the income bracket is higher (from 20% to 30%), in which case it's more like 10+% tax return on $15-20K versus the 5% on $5K.