For those who have pension plans...
 

If you work for a large company, Crown corporation, level of government, etc and have a good pension plan (indexed to inflation, etc.), what are you doing with your savings?

For the last couple of years, I've made small lump sum contributions to an RRSP at tax time. However, provided that I stay with my employer long-term and earn more money, an RRSP is probably a bad choice in the long-run because I will have a relatively high income when I retire. On the other hand, I have a couple of other sources of income (part-time job and rental income) and I need to find ways to write off the extra income (which an RRSP contribution so conveniently does.)

I would eventually like to go back to school and pursue a Masters so perhaps when I earn less as a student, that might be a good time to cash out the RRSP. So, an option like the TFSA might be a good way to do this. However, I'm on a budget and I can't expect to make contributions to both an RRSP and a TSFA (and I probably should spend less on 'stuff'). Any thoughts?

tough choice. I wish I had a guaranteed pension plan. the ones that pay x% of your retiring salary. like teachers etc. but mine is just an RRSP matching thing. so who knows what I'll end up with.

if you only have say a couple grand each year to put away. I would put that money into RRSP, and then when you get the tax return, put that money into the TFSA. (although you probably wouldn't get anything back with rental income as well)

pulling out the RRSP money while at school would be good, as long as you are there for the full tax year and not making any or not much other money.

Here's a quick read you might think about:

http://www.nationalpost.com/story.html?id=1247819

"IN THIS SHAKY ECONOMY, MAKE TFSA SAVINGS YOUR FIRST PRIORITY"

By Jonathan Chevreau

The new year began with much hoopla about Ottawa's new tax free savings account, or tfsa, for once displacing the non-stop hype about rrsps that normally abounds in January and February.

No surprises there. While the two savings vehicles are essentially mirror images of each other, the TFSA has the advantage, from a marketing point of view, of not having the word "retirement" in its name. The Great Crash of 2008 has so shattered equities-weighted RRSPs that the average boomer is delaying retirement by almost six years, according to a recent survey by Desjardins Financial Security.

But are TFSAs, which allow people to invest up to $5,000 a year and let it grow tax free, a better option? Ultimately, there's no reason to make the TFSA or RRSP an either/or choice. You should do both. That said, a TFSA should be a priority in this shaky economy. Invested in liquid cash-equivalents, it provides the perfect emergency fund. But remember, the TFSA offers no upfront tax deduction, as does the RRSP. You should still want to minimize calendar 2008 taxes by making RRSP contributions before the March 2 deadline.

If you don't have cash for both, fund the TFSA first, then get a top-up loan to maximize RRSP contributions. When you get a tax refund in the spring, you can use it to reduce the outstanding loan principal. At that point, a financial planner can help you find the best way to retire the balance.

Jonathan Chevreau blogs at wealthyboomer.ca.

jchevreau@nationalpost.com

"A TFSA CAN BE A BETTER WAY TO SAVE FOR MAJOR PURCHASES"

By Garry Marr

The question of whether to contribute to a registered retirement savings plan has never been more difficult for families. It used to be simple. Put your money in, lower your taxable income and get a big fat refund cheque. But now there are several tax-shelter programs vying for your savings, including the Registered Education Savings Plan and the Registered Disability Savings Plan.

Such programs -- regardless of how many you invest in -- don't leave much room to take advantage of the new Tax Free Savings Account. But when you stack TFSAs up against the others, it's arguably the best way to save because you can deposit or withdraw money whenever you want.

Sure you can get money out of your RRSP. The Home Buyers' Plan allows first-time buyers to borrow $20,000 from their plan for a first-time down payment. The Lifelong Learning Plan also permits people to take loans from their RRSPs.

But in reality, trying to make withdrawals from any registered plan comes with strict rules and penalties, which points to the benefits of TFSA flexibility. Say you've been saving in your RRSP to buy your first house and you end up having a significant health problem. You won't be able to access your RRSP savings without a tax hit. But if you're saving in a TFSA, you can take as much as you need. No questions asked. That's not to say young families should forget RRSPs, but TFSAs are better when saving for major purchases, like your first home.

Garry Marr writes "Family Man" in Financial Post.

gmarr@nationalpost.com

Depends on your income but if you're looking for the long term, RRSP is better.

You can also do an RSP meltdown later on if you're worried about tax consequences.

Keep in mind, you can invest into an RSP today but you can wait until later to make the claim for the tax deduction.

Another part about the TFSA that institutions don't tell you is that while there are no tax consequences for withdrawing money from this plan, the underlying funds in that account may be subject to fees and also the bank may charge a fee to transfer out of it.

You are still subject to DSC or penalties. Also, if the money is withdrawn, you can not put that money back in until the beginning of the next year otherwise it is classified as an over contribution and will be charged a penalty of 1% per month.

Contrary to how the government has marketed this account, it's primarily an account for wealthy people who have maxed out their RSP contribution room and now are looking for other places to stick their money without any tax consequences.

Keep in mind most of this is for public perception. The government needs to look like they are helping in a big way when in fact it's a very small help.

I put in $5k a few weeks ago but only after maxing out my RSP for this year. I would have rather had the government increase the RSP contribution room.