It is tax rates that determine whether an RRSP or TFSA will work out better for Ami, but the drag of capital gains taxes in non-registered accounts makes them a worse choice than TFSAs and usually worse than RRSPs.
This is a great way to re-frame the way that you think about your money:
Essentially, the realization I had is that money is permanent. You have it until you trade it for something, and then that trade is permanent — you are thereafter permanently without that money. It’s gone and belongs to someone else now. Therefore it’s important to consider the permanence of whatever benefit you traded it for.
Think about it: when you die, you will have earned and spent a specific, finite number of dollars. For you the number might be 2,193,003, or maybe it’s 8,806,550, or even 217,101,992. Whatever it is, at the moment you die, it is a real and actual number.
Every expenditure comes out of a large but finite pile of all the dollars that will ever be available to me, not a running pipeline that comes from somewhere out of sight. My mentality now is to build something with my dollars, rather than fuel something with them. The thing I’m trying to build is a life that’s set up to generate happiness on its own, as an inevitable byproduct. Every dollar I burn — rather than place somewhere where it will contribute to my happiness for a long time — is a lost opportunity that will affect what I am working with for rest of my life, to some degree.
It’s easy to get caught up in the doomsdayers when the markets are down, but just a month ago, everyone was talking about how 2014 was going to be smooth sailing. You just have to cut out the noise and stick to your plan. I should really allocate some of my portfolio to the emerging markets.
Here’s hoping today’s growth is just a breather before another stretch of selling. It would make me feel better when this year’s new RRSP space opens up in the spring.