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TFSA vs RRSP priority for young couple

7035 Views 11 Replies 10 Participants Last post by  steve41
Just when I thought I had it all figured out :confused:

I'm making the switch this week for both my partners and my RRSP's out of our institutions high MER mutual funds (mine is the worst with a 2.72% MER @ Investors Group, ouch!). After lots and lots of reading on these and other forums I figured I'll make the switch to TD eFunds. I thought I had it all figured out and then I ran into this new guy on the block... TFSA.

We're both in our mid 20's. Each have incomes around the 50k level. We each have about 10k in RRSP's. We never max. out our RRSP contribution room and I don't think we ever will in the future.

What priority should we have for TFSA vs RRSP? Let's keep this strictly about retirement savings. I know the TFSA has the benefit of being able to take out the money at anytime but I don't want to do that. I keep reading it all depends what tax bracket you'll be taking the money out at. Well I'm a looooong time away from retirement. I have no idea what I'm going to be doing in 30 years. Maybe I'll be making more money, maybe I'll be making less money.

Would it be safe for now to just focus on 100% RRSP with tax returns going back into the RRSP's. Or should I start thinking about putting a bit of money towards a TFSA. Right now we're doing bi-weekly contributions towards only RRSP's.
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When you consider the estate, i.e. if you should die prematurely, the TFSA option will be favoured. If you make it out to a ripe old age, then the RRSP will have been a better choice. Also, if you absolutely know you will be making a large lump sum 'cash call' at some point in time, then the TFSA is where this money should be stashed. In general, the scale of the two overall strategies are pretty similar.
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