Personal Question about My Retirement Savings
Hi everyone,
This is my first post on RedFlagDeals, but after reading over some posts, you all seem like a very knowledgable bunch. I was hoping to get some of opinions on my current basic plan. I would really really appreciate any insight you could provide!
I am currently a 24 year old just finishing up University that is obsessed with starting my retirement savings. I work full-time and have paid off my student loans. I am not in my career yet, however, so I am in a lower tax bracket.
What I am currently planning on doing is contributing approximately $800 a month to an index fund (haven't decided on which market distributions yet) through TFSA.
I considered ETFs, but I think that TD eFunds are better for me because of the commissions you pay on ETFs, and I would be making regular contributions.
Also, hear me out on the TFSA thing! I might be crazy here, because I am not reading this idea anywhere else. But the TFSA seems ideal for retirement savings if you use it right.
Sure I am forgoing the immediate tax deferral on my income, but I don't need that yet since I deductions from my education credits that bring down my taxable income. Furthermore, I am in a lower tax bracket than I will--hopefully--be in a couple years, where I can really maximize the tax deferral from my RRSP room.
Also, it seems to me that the tax savings with TFSAs are greater than RRSPs. I know that capital gains are only taxed at 50%, so I'm already not taxed very much on my index funds...but if they do grow at an average of 10% per year, like the SP500 historically has over the last 100 years, then I could end up saving a lot of money when I withdraw it all, tax-free, in my retirement years. In contrast, I would be paying income tax on my RRSP withdrawals, even if it is a low tax rate, it is still tax on everything coming out. With the TFSA, I only paid tax on the principle, which will hopefully grown substantially by my retirement years.
Also, am I crazy to want to invest EVERYTHING in index funds/equities? I am following the rule here that you subtract your age from 100 or something, and then the remainder if how much you put in Bonds and/or safer investments. I just know that with me being 24, I ought to have most of my money in equities since it's so long term.
Furthermore, I am a huge fan of the efficient market thesis, which suggests that I have no chance of picking the right stocks that will beat the index and most fund managers can't even either.
I apologize for laying out my life story and making you read all that! I would really really appreciate any insight that any of you could give to my young and impressionable self.
Thank you so much!
This is my first post on RedFlagDeals, but after reading over some posts, you all seem like a very knowledgable bunch. I was hoping to get some of opinions on my current basic plan. I would really really appreciate any insight you could provide!
I am currently a 24 year old just finishing up University that is obsessed with starting my retirement savings. I work full-time and have paid off my student loans. I am not in my career yet, however, so I am in a lower tax bracket.
What I am currently planning on doing is contributing approximately $800 a month to an index fund (haven't decided on which market distributions yet) through TFSA.
I considered ETFs, but I think that TD eFunds are better for me because of the commissions you pay on ETFs, and I would be making regular contributions.
Also, hear me out on the TFSA thing! I might be crazy here, because I am not reading this idea anywhere else. But the TFSA seems ideal for retirement savings if you use it right.
Sure I am forgoing the immediate tax deferral on my income, but I don't need that yet since I deductions from my education credits that bring down my taxable income. Furthermore, I am in a lower tax bracket than I will--hopefully--be in a couple years, where I can really maximize the tax deferral from my RRSP room.
Also, it seems to me that the tax savings with TFSAs are greater than RRSPs. I know that capital gains are only taxed at 50%, so I'm already not taxed very much on my index funds...but if they do grow at an average of 10% per year, like the SP500 historically has over the last 100 years, then I could end up saving a lot of money when I withdraw it all, tax-free, in my retirement years. In contrast, I would be paying income tax on my RRSP withdrawals, even if it is a low tax rate, it is still tax on everything coming out. With the TFSA, I only paid tax on the principle, which will hopefully grown substantially by my retirement years.
Also, am I crazy to want to invest EVERYTHING in index funds/equities? I am following the rule here that you subtract your age from 100 or something, and then the remainder if how much you put in Bonds and/or safer investments. I just know that with me being 24, I ought to have most of my money in equities since it's so long term.
Furthermore, I am a huge fan of the efficient market thesis, which suggests that I have no chance of picking the right stocks that will beat the index and most fund managers can't even either.
I apologize for laying out my life story and making you read all that! I would really really appreciate any insight that any of you could give to my young and impressionable self.
Thank you so much!