News Item Summary

News Item Assignment

By: LaToya Grant

Due: February 7 2017

Professor: Doug Stephenson

News Item assignment

The article I have chosen is called “Timing is everything: the long and short of the TFSA vs. RRSP decision”, it  highlights the growing popularity and preference towards TFSA accounts, as well as the continuing decline of the RRSP, and what would be the best way to use these accounts to reach financial goals. The article breaks these goals down in to short term, medium term, and long term and analyzes the pros and cons and the best ways to possible use each account to clients advantage

For short term goals, the TFSA is more appropriate since deductions are not taxed, nor do they count towards income, making the TFSA highly liquid. For medium term goals, a TFSA or RRSP can be good option depending on client’s needs. For example buying a house, a TFSA can be a good way to save for a house, but the contribution limit is significantly lower than RRSP, so the RRSP is a better choice. The RRSP also offers the Home buyers plan for 1st time home buyers, and the Lifelong learning plan to borrow funds to pursue higher education. Long term goals can also be satisfied by either a RRSP or TFSA, however an important issue with RRSP, is that it was intended for those retiring at age 65, however most are working well beyond the age of 65 these days, which makes the TFSA a potentially better option because it is not taxed like RRSP, and withdrawal not counted towards income.

This article is relevant to my chosen career as an accountant and financial planner. As a financial planner, being able to help clients make decision such as the ones in this article will be essential to my success. It is important to be knowledgeable not only on course material, but be aware of current events and issues surrounding various investments and savings vehicles to be able to guide my clients in the right direction towards their goals.

Citations:

business.financialpost.com/personal-finance/the-long-and-the-short-of-the-rrsp-vs-tfsa-battle