[DAvid]

-If you contribute regularly to an RRSP, you can instead take the money you would have used and contribute it to your TFSA to rebuild up to the amount you withdrew in the previous year (plus another $5000 in 2010) without worrying about the RRSP since you already put in a lump sum of $3000

Of course, you will be taxed when it comes time to take money out of your RRSP, but now you have an additional $3000 of capital in there that you didn't have before, and if you're young enough, many years left to grow it.

What do you think of this strategy? Pros? Cons?

So let me get this straight: you withdraw $3000 from your TFSA to add to your RRSP. You also have enough cash on hand to replace the $3000 withdrawn, plus add another $5000 in the TFSA?

Why not just contribute the $3000 directly to the RRSP without playing the shell game, take the $660 refund and top up whatever you wish?

DAvid

 

[DAvid]

In addition to my earlier comment, it strikes me that if your current marginal tax rate is only 22%, you will likely see better benefit from the TFSA. RRSP contributions provide a greater benefit to those in higher marginal tax rates on contribution, with the expectation their average tax rate on withdrawl will be less. Few folks contributing to RRSPs expect to be earning sufficient income that they would likely be in a tax bracket higher than 22%.

DAvid