What should I do, do you have any hints ? | Your stories | Discussion forum

I have an online business which goes generally well, but which has a little less revenues due to the economic crisis. My wife and I decided to sell our house, which will enable us to eliminate all our debts and make around 50,000$ in profit.

We will each deposit 5,000$ into our TSFA and next year, another 5,500$. We want to keep a small portion, like 5000$ in our shared bank account and get more interests on the rest.

We also still owe 9 years of our HBP. We had borrowed 40,000$ (20,000$ each), so we need to place 1333.33$ each in a RRSP each year. In the last 6 years, we have never been able to even place 1 dollar in a RRSP due to the cost of completing our new house ( placing the lawn, paving the entrance, etc... ).

We want for now the top security. We are only 33, so once the crisis is over, we might invest more.

We live in Québec.

So, here are my questions :

1 ) How does it work with the TSFA if your TSFA and the rest of your HIS are in the same bank, say, People's trust. Do I open 3 accounts (1 shared outside the TSFA, one TSFA for my wife and one TSFA for me ?) and each year move from the regular HIS to the TSFA accounts the 10,000+ we are allowed to move ?

2 ) Do you guys have recommendations for RRSPs I need to take for the HBP ? Do you take the RRSPs from the same HIS banks or should I be more creative to try and bring more interests ? It will only be 2666$ total per year.... My worry is that since it is harder to touch and since you pay taxes on the gain, I am not sure really what's the best solution.

3 ) If I keep 21,000 of that 50,000 for TSFA investing, 10,000 right now and 11,000 next year, would it be wiser for me to place the remaining in a simple HIS or should I use portions to reduce my taxes over the next few years and place the tax refunds in a HIS for future use in a TSFA ?

4 ) We have an incorporated business. Dividend revenues are taxed lower, but we have barely used them. Would it be wise to pay only a small salary which covers our expenses, and use dividends for RRSP investments, which means that we lower our taxes even more, giving bigger tax returns to place in a HIS ?

For example, let's say we move 10,000$ (5,000$ each) of gross revenue we want to save next year from salary to dividend. Instead of paying say 40% of taxes on that, we would pay around 20%. But since we place 10,000$ in a RRSP, doesn't that provide an ever bigger kick ?

People's choice look like they will always pay more than the inflation, as such, it is a good safe investment which is mobile and easy to withdraw and use.

I am a BIG believer in the TSFA. I never liked the RRSP concept of reporting taxes.

If you place 10,000$ in a RRSP and get to save 4,000$ in taxes, that's great, but if the RRSP is worth 80,000$ in your retirement, that 70,000$ in gain is going to cost a lot more than 4,000$.