I have been fortunate enough to not have to think about taxes for the longest time. Unfortunately though, that is because of my long stay in academia plus a couple of years of a low salary research position. I didn't have to pay much income taxes, if at all. Things are different now that I am working in a full time job with a decent pay. I am reminded of the impact of our high Canadian taxes from the missing chunk on every paycheck. That is why I am looking into what to do with my RRSP contribution lately. Last month, I analyzed the cost-benefit of a Tax Free Trading Account. I concluded that a TFSA trading account is not worth my while for the moment. So I will probably just stash my TFSA contribution in a good old savings account for now. That is not the case with a RRSP. One big difference that change the whole argument around with RRSP is that any contribution that I make into it is tax deductible! I won't go into details here because I hate taxes. Refer to the Wikipedia entry on RRSP if you are unfamiliar with it. Essentially, I am guaranteed about 30% (or your marginal tax rate) of "profit" by way of tax refund for the amount of money which I put into my RRSP account. I don't know about you, but 30% is a massive return for me! And it's risk free! (Technically it's just a refund of my own money, but still) The benefit of having a RRSP is obvious. What I have been pondering about is where should I put my money in my RRSP? As I discussed in Benefits of trading in a TFSA account, there are many limitations to a self-directed registered account. Although there are certainly other options than just trading stocks in a registered account. Here are the options that I have considered.
- Savings account
- Fixed income
- Mutual funds
- Exchange traded funds
- Individual stocks
In my next post, I will rank my preferences for each retirement investment option.