Comment by parliament32
4 hours ago
If you retire in 30 years, and invest that $50k in the S&P500, you'll end up with about $872k (given the S&P makes about 10% annually[1]). The difference is, in the non-registered scenario, you only pay 50% of the marginal tax rate, because it's capital gains. In the RRSP, you pay full tax on all investment earnings (because it's considered "income" at the time of the withdraw). Your tax bracket might be better at retirement, but will it be 50% better? That's the big question for me (not even considering the value of a liquid vs illiquid investment, but that's more of a personal planning problem).
[1] https://www.investopedia.com/ask/answers/042415/what-average...
I would really recommend playing around with Canadian specific financial planning and retirement calculators. Maybe the Canadian system is totally fucked - I don’t know. But your inclinations are a very common misconception about 401k’s in the US and I suspect this holds true in Canada too.
A few things to note:
* In the US at least - you invest your 401k in whatever funds you want. Mine are a mix of S&P500 and Total Market.
* 7-8% is the average inflation-adjusted return of the S&P500 over its history and is general figure you’ll see used in retirement planning discussions
There’s a huge wealth of resources out there on this topic. Look up Canadian specific “FIRE” guidance (Financially Independent Retired Early). I don’t know enough (or anything!) about Canada to really engage on this - but I’ve done pretty extensive planning both myself and with my financial advisor on my own early retirement objectives. For me - the math massively works out in favor of a 401k over non-tax advantaged accounts. I personally have a mix of Traditional (pre-tax), ROTH (post-tax), and non-tax advantaged accounts (because I save more than I am allowed to stuff into tax advantaged accounts per year).