Episode 319 - The Ultimate RRSP vs. TFSA Showdown

21:49Right now, we're inflating everything at 2.5 % per year in this example. So we assume inflation is 2.5 % per year. So when we're talking about a million of future value, like avocados are gonna cost like$98 per avocado in that future scenario. So a million dollars isn't gonna buy you anywhere near the same as it would buy you today, but it was still a fairly impressive number. And at first, I couldn't really figure out where the difference was coming from. I just thought I'd made a mistake somewhere, like at$60 ,000 of income, I was quite surprised that the delta between the RSV and the TFSA was so huge.

22:18So I couldn't really figure it out. So I shot a couple messages to some of my nerdy advisor friends, our friend Eravind Sitham Parapolai. Did I get that right, man? That's it. Yeah, you got it. Nice. And another friend of ours, can't remember his name, starts with a J. Jason Pereira. Yeah, that's it. Jordan Parsnip. That's right. That's the guy. Anyway, so I ran it through with them really quick and they jumped on a Zoom call with me right away and we tried to figure it out. And Erevin is a huge tax nerd. And when he gets excited about planning, his brain just goes into like hyperdrive. And within 10 minutes, he's like, no, I figured it out.

22:52And so what it was is I talked earlier about the basic personal amount, which everybody gets. It's basically a tax credit on the first$15 ,000 of income is essentially tax-free in today's dollars. Today, it's around 50. I think it's exactly$15 ,000 of income that you earn is tax-free time. If we index that$15 ,000 at two and a half percent per year. In this example that I was running, by the time this couple is 65 and ready for retirement, that bracket, the basic personal amount would grow to about$42 ,000 per person. And so that's$84 ,000 for a couple at age 65 that they could in theory earn without paying any taxes.

23:29And again, in this example, I've delayed CPP and old age security to age 70. So there's this window here of age 65 to age 70, where in In the TFSA example, they have zero taxable income because they're withdrawing everything from a TFSA at age 65. And then CPP and OAS kicks in at age 70. So they have no taxable income from 65 to 70. But in the RSP example, again, I'm delaying CPP and OAS, but they have only taxable income from age 65 to 70. And so over that five-year period, that's$420 ,000 of RSPs that can come out tax-free. And that's really interesting because that creates a situation where the RSP, at least on that amount becomes a pure tax flow through zero tax.

24:10So you've got$420 ,000 of RSP money that you put in and got your taxes back. It's pre-tax money, but you paid zero tax. And the only other instances of that being available to Canadians is like the first home savings account. If you buy a qualifying home is a pure tax flow through the healthcare savings accounts for some small business owners and corporations up to certain limits can act that way. But there are very few opportunities to literally earn a dollar and keep a dollar. So it's straight tax arbitrage between your marginal rate when you made the contribution and zero in 40 to 49 years from now.

24:43Exactly. And that chunk of the RRSP being coming up tax-free explained like three quarters of the delta between the RRSP and the TFSA scenario, which is really interesting. And Erevin pointed something out to me, and I don't really know how he figured this out, but he instantly said, oh, in that case, the RRSP will always win even at the lower bracket. He'll have to explain that to you because I don't know how he figured that out. I was like, what's he talking about? So I went back and I ran it at$48 ,000 of income instead of$60 ,000 of income. Because in BC, at least$48 ,000 is basically the top of the first tax bracket.

25:12And even at$48 ,000, the RSP was beating the TFSA. And it largely came down to this basic personal amount tax credit. Essentially, with the TFSA, you can't avail yourself of any tax credits. The RSP, you have a chance to reduce your marginal rates even further in retirement because of the tax credits you get. And so you get this kind of dual benefit from the RSP in that sense. So TFSA basically forces the high marginal rate when you made the contribution through your lifetime with no chance for any sort of tax recapture. In fact, that's what's going on. Interesting. Yeah, exactly. So like the way I was thinking about it is, if you're going to delay CPP and old age security, in the TFSA only scenario, there's an additional cost to delaying CPP and old age security.

25:54Because if you were to take it at 65, you'd be able to use up that basic personal amount, those tax brackets with the CPP and OAS income at 65. So if you delay it to 70, the additional cost is that you're not going to be able to avail yourself of any of these tax credits. So it becomes more expensive almost to delay OAS and CPP in a scenario where all you have is tax-free income otherwise. So the RRSP is a tax hedge. Now, when I ran it at$48 ,000 of income per person, I didn't think it was fair to use $7 ,000 of savings each just because that income at$48 ,000 is a starting salary for a lot of people.

26:24Being able to save$7 ,000 each per year is probably a relatively high amount for a lot of people. So I dropped the contribution to$3 ,000 per spouse instead of$7 ,000. But again, the RSP won in that scenario. So Aravind was right in his intuition that they would even work at the lowest tax bracket. It wasn't by as wide of a margin as the original example with$60 ,000, but the RSP did come out ahead. But like I said, then I tried to, in the TFSA scenario, I set 65 as the age for the CPP and OAS to try to soak up some of those brackets. But it was actually worse than delaying CPP. So they were able to avail themselves of that basic personal amount of tax credit.

26:57But by taking CPP and OAS early or at age 65, they didn't get the benefit of the deferral, which increases those pensions for the rest of your life. So at age 95, taking CPP and OAS was still the right decision, which then got me thinking about what if they die young? What if they die to 80 and not 95? What would that look like? And so I started running these other scenarios with different longevities, and I'll get into some of the results of that as well. So at this point, I'm thinking, okay, the RSP wins basically every time. And then it occurred to me that at this point, Conquest Planning doesn't have the guaranteed income supplement built in, which we call GIS.

27:31So GIS, for those that aren't familiar with it, guaranteed income supplement, it's a government support payment for Canadian seniors age 65 or older. It's an income-tested benefit, and it's really designed to help very low-income Canadians. It's a tax-free benefit paid annually. Again, it's income-tested, so there's a ceiling of income over which you don't qualify for the GIS at all, but it's also tied to your old-age security payment, so you can't get the GIS unless you're also receiving old-age security. The government of Canada has a really nice little calculator on their website where you can input your age today, your expected retirement income, you're expected taxable retirement income, and it will tell you what it thinks you will qualify for in terms of the guaranteed income supplement.

28:14And again, in the TFSA scenario, from 65 to 70, they have zero taxable income because they're not taking CPP or OAS. But by adding in GIS, using that calculator, figuring out what the present value of their GIS would be, and then inflating that from 65 to 70, also taking old age security at age 65, because again, to get the GIS, you have to take the old age security, that drastically changed things. So at age 65, you're getting old age security. In this example, you're getting the guaranteed income supplement, which works out to about$7 ,500 per year tax-free for those five years per spouse. So we've got $15 ,000 of tax-free income coming in every year.

28:49And that's based on the fact that we have spouses here. If you're a single person, the ceiling's different. If you're a couple, then it's a different ceiling. So in the case of a couple, it was$15 ,000 of additional total household income for five years from 65 to 70. That drastically changed things. So in that scenario, the TFSA came out ahead, but not as much as I would have thought. So in conquest, we have something called a retirement score. And really what the retirement score is, is it takes the present value of your total after-tax cash flows in retirement, takes the present value of that, and just divides it by the total present value of your after-tax expenses in retirement.

29:24And so if you have a higher present value of income than expenses, you have a number over 100 % for your retirement score. And if it's below that, and there's a shortfall somewhere in the plan, you're going to have less than 100%, right? Obviously, we want to shoot for more than 100%. That means we're fully funded for retirement according to the model. So in the RSP scenario, death at age 95,$48 ,000 of income, saving$3 ,000 a year, the RSP had a retirement score of 110%. So they're fully funded for retirement. That's using a linear rate of return. So that assumes the returns are earned equally every single year with zero volatility.

29:59I should also point out I used a 5.9 % rate of return in all of these models, assuming an all equity portfolio, 5.9%. It's not our expected returns. This is the expected returns that comes off the shelf in Conquest. And when I ran the TFSA scenario, it was 113%. So the difference in retirement funding, even with the guaranteed income supplement, it was only like an absolute difference of 3%. So I wanted to look at some other metrics. And so I wanted to look at what's the projected value of the estate? What's left over? Net of taxes, net of probate fees, net of everything. What's the check that's going to the inheritors of this estate using this model?

30:35And with the RRSP at age 95, the future value of the estate was$1.17 million. And with the TFSA, it was$1.76 million. That's future value. So quite a significant difference, right? In present value terms, it's about$100 ,000 difference. So in present value terms, we're talking about a$200 ,000 estate for the RSP and a$300 ,000 estate for the TFSA. 50 % increase more or less, which is, okay, that's significant. But again, that uses linear returns. And if we Monte Carlo this, meaning if we'd say, okay, this couple retires a thousand times, and they get a different return and a different order of returns in the retirement, it's not like a GIC where you're going to get 5.9 % per year.

31:17We know the order of returns matters and we know there's volatility on risky assets and so you're not going to get 5.91 percent what if we retire a thousand times how many times did we run out of money in each scenario the rsp versus the tfsa and what was really interesting is the rsp actually came out ahead in that scenario because it has to do with the old age security which i'll explain in a second but the rsp the monte carlo pass rate at age 95 59.4 percent of the time they still had money left at age 95. So out of a thousand simulations, 594 times, they still had money left. They had not run out of money.

31:51With the TFSA and the guaranteed income supplement, it was 60.7. So it was barely higher. And again, that is with the guaranteed income supplement. Without the guaranteed income supplement, the TFSA scenario drops down to 54.6%. So significantly worse than the RRSP scenario. So there just wasn't a huge difference, even when you account for guaranteed income supplement. You said OAS was the explanation for that. What does that mean? Oh, yeah, yeah, yeah. So the reason that I think the scenario, even with the guaranteed income supplement, wasn't light years ahead is because you're then forced to take old age security earlier than you wanted to or earlier than would have been optimal.

32:27And so you're not getting the benefit of the old age security deferral because you're taking it 65 instead of 70. So the lifetime income that you get out of old age security in order to get the guaranteed income supplement, you're getting less OAS over time in order to get the tax-free income from the guaranteed income supplement. I think so. I'm just wondering if, Because when you run a Monte Carlo simulation, bad outcomes should be less bad for the RRSP than the TFSA, I think, because you'll pay less tax. Your pre-tax savings account should offer some amount of hedge against bad investment outcomes.

32:58Because the government owns part of the RRSP and they're paying some of the... Effectively, yeah. If you lose in your RRSP, you're reducing your future tax bill also. But the TFSA, you've already prepaid, right? Yeah, makes sense. I think Scott Cederberg talks about that in his paper. We talked to him about that the first time he was on Rash Reminder about his paper on pre versus post-tax savings optimization. Just reduces the future tax liability, not the tax liability in the year that the cash is needed because I assume you had a spending amount you needed in this plan. So if there's a shortfall, it had to take up more RRSP to make up that shortfall.

33:28No, no, it would have been fixed dollar because you had a gap. It just means you had less RRSP at the end of that year, therefore reducing future tax liability. I think that's what it is. I think that if you just compare pre and post-tax savings, I think the pre-tax account is going to give you some amount of protection against bad investment outcomes. That's a good point though, Cameron. I did use a$6 ,000 after-tax retirement target for this analysis because if you take two people earning$48 ,000 per year, back out taxes and CPP contributions, and then back out$3 ,000 of savings each, what's left is about$72 ,000 after tax.

33:58So that's their current lifestyle is about$6 ,000 a month. And so I use that as the retirement target as well. So the gap that was being used by the RSP to be filled, that tax liability in that year is the same. But to Ben's point, if you're selling more units to make that payment, there's less RSP later. If when the market's rebound, thus reducing the future tax liability because your RSP is going to be smaller. Here's what in that Cederberg paper, it's the David Brown, Scott Cederberg, Michael O. Doherty paper, Tax Uncertainty and Retirement Savings Diversification. Classic. It is a good paper.

34:28It's in the Journal of Financial Economics. Traditional accounts, which in their case is what are they called? IRA accounts, not the Roth, the traditional IRA. Traditional accounts are valuable for hedging retirement account performance and managing current year income near tax bracket cutoffs. Whereas Roth or TFSA in our case, accounts allow investors to mitigate uncertainty over future tax schedules, somewhat related to the stuff you're talking about. I'm sure that plays into it. That's harder to, I think, tease out of cashflow model. But it should show up in the Monte Carlo though. Yeah. The Monte Carlo just gives me the score and the actual range, right?

34:59It's not that I can look into every year of the Monte Carlo and see what's happening. I can just see the past fail rate for that year. One of the other really interesting stats that this particular Monte Carlo shows is in years where you ran out of money, what was the largest shortfall in any given year? So when you did run out of money, how much were you short? And the RSP comes out ahead here. And I think this is related to the old age security as well. Because if we look at the RSP scenario, again, the Monte Carlo pass rate was 59.4%. The largest shortfall in any given year was$31 ,000. So they were$31 ,000 short for their goal of$72 ,000 per year in income.

35:36That was the worst case scenario with the RRSP. With the TFSA, even with the guaranteed income supplement, the worst shortfall was$59 ,900. So nearly double. And I think the reason there is that again, because of the old age security being deferred to age 70, your minimum baseline income from 70 to 95 is that much higher. So your worst case scenario isn't as bad because you've got more old age security income coming in and that's fixed and it's also inflation adjusted. Whereas with the guaranteed income supplement scenario, you're taking the old age security at age 65. So your minimum income floor is lower for the rest of retirement.

36:10So in the cases where you did run out of money, you had a bigger shortfall between your fixed income and what your goal spending target was. Can you reiterate why there's a difference in timing on when you're taking OAS in the two scenarios? Yeah. So in the case where you have guaranteed income supplement, it's tied to taking old age security. You cannot receive the guaranteed income supplement unless you are already taking the OAS benefit payments. So if you delay old age security to age 70, you can't receive the guaranteed income supplement. Because it boosts your income too much. No, because it's tied to the old age security.

36:42The qualification for a guaranteed income supplement, first qualification is you are receiving old age security payments. That's it. In fact, old age security income is not used when testing your income level for the guaranteed income supplement. So that income ceiling. Okay. So you won't receive it for those five years. If you delay. That's what I'm saying. Yeah. You won't receive any guaranteed income supplement if you delay. You won't get the GIS later because now CPP comes in and CPP is too high for you to qualify for the GIS. Oh, so you take it early so you can get the GIS for those five years.

37:15Exactly what I'm saying. Yes. But you defer the CPP. So CPP income is used to see if you qualify for the GIS. In terms of the income ceiling, CPP income qualifies. in this case, I used 66 % of the maximum CPP because their income is$48 ,000. And that's about 66 % of the what we call the YMPE, which is their CPP contribution ceiling. So in this scenario, by delaying CPP and only having a TFSA, they would in theory qualify for the guaranteed income supplement. The only way to get the guaranteed income supplement is to apply for old age security and old age security income is not used in the test as to whether you have too much income for the guaranteed income supplement.

37:52Crystal clear now. You've basically modeled smart financial planning into the comparison. Yeah. And now I think, and this is a question of morality, but there are planners out there who plan for their wealthy clients to try to qualify for the guaranteed income supplement for those five years. And I think that's pretty gross, to be honest. That's my personal opinion. I don't think the guaranteed income supplement is designed for wealthy people who just aren't paying any tax to get some tax-free income from the government. but I know planners who intentionally try to design things so they have zero income between age 65 and age 70 so that they get the guaranteed income supplement.

38:28On that point, I would not be surprised if the guaranteed income supplement somehow became TFSA tested in the future. So the government knows the value of our TFSAs. They get a transaction report, but they also get a report that shows the market value of people's TFSAs. And as TFSAs get bigger over time, and again, this is pure speculation on my part, CRA has not come out and said anything about this as far as I know, but I would not be surprised if people with mid six and seven figure TFSAs who are trying to qualify for GIS, CRA just goes, what's your TFSA balance? Oh, it's over X. You're absolutely not qualifying for the guaranteed income supplement for low income seniors.

39:05I'm sorry. Pure speculation, but especially I'm 40 now, 25 years from now, do I think the GIS will be there when TFSAs are in the seven figures? Be there for you. It'll be there for people with low incomes. It'll be there for people with low incomes for sure. and small TFSAs. There'll be some threshold, I think, under which maybe you can qualify, but I wouldn't be surprised because it's just not a far leap. They already have the value of your TFSA and they can just look at your guaranteed income supplement application and say, do you qualify based on your TFSA balance? And Ben, you and I talked about that on an episode a long time ago.

39:35We had a client that had that exact experience accidentally and they were getting the GIS and they were stunned because they've rather large RSPs. And their comment was, Yeah, this is gross. Yeah, like old age security has a pretty high income test. It's around, I think, like$90 ,000 now. But GIS is really designed for people who are low poverty level incomes. Great program, but it's certainly not designed for people trying to game the system with a TFSA to get it right. Without the GIS, if you believe what I just said in that, okay, maybe GIS is not going to be there for me. And now I still have to make the decision of a TFSA versus an RRSP.

40:07in the scenario where there's no guaranteed income supplement at age 95, the estate value, the future value of the estate with the TFSA was 659 ,000 and the retirement score was 105%. And again, with the RSP scenario, the retirement score was 110 % and the estate value was 1.17 million. So nearly double the estate value. So the GIS really was the entire difference maker between the RSP and the TFSA in that scenario, which kind of leads you to think, okay, Even at$48 ,000 of income then, your decision as to whether to contribute to a TFSA or an RSP largely comes down to your belief as to whether the GIS will be there for people with large TFSAs later.

40:48I didn't see that coming. No. You can't do it on the back of a napkin. A little too complicated. Yeah, for sure. And again, I tested things like moving CPP and OAS around to see if we can improve the situation. But the best scenario for both cases, TFSA and RSP is deferring CPP and old age security and only with GIS did I have to pull the old age security back to age 65, which actually detracted from the OAS income, but at least gave you the guaranteed income supplement. So then that got me thinking as well about what if you have kids? And the reason this I think is interesting is because if you have kids, you qualify for the childcare benefit.

41:20And this is an income tested benefit as well. And it's based on the number of kids you have and it's based on your income. But I said, okay, if we contribute to RSPs, we're lowering our income and we would qualify for more childcare benefits that way. So what if we ran a scenario still at$48 ,000, still saving$3 ,000 a year to one of these accounts, but we added two children. How would that impact things? And when we got the childcare benefit, when we received that payment, we saved that money as well instead of spending it. The Canada child benefit? Yeah, sorry. Yeah. And it can be pretty significant.

41:51So I ran a scenario where they had two kids at the parents' ages of 30 and 32. They started age 25, but at 30 and then age 32, they have two kids. Again, their income is$48 ,000, goes up by inflation. Years and years, they get the Canada Child Benefit. And in some years, it was as high as$12 ,000 of benefits that they were paid. So it can be quite a significant amount. And I set up this scenario so that in the TFSA scenario, as much as possible would go to fill up their TFSAs. If there was still room available, if there was no room available because they'd maxed it out, the excess would go into a non-registered taxable account.

42:25And then I did the same with the RSPs. So if you're contributing to the RSP, you get the Canada Child Benefit. That goes into their RSPs up to their RSP room based on their previous year's income. any excess goes to a non-registered account. I wanted to see what difference that would make because in the RSP scenario, you would get more Canada Child Benefit because you're lowering your income even further with the RSP contribution. And because the Canada Child Benefit is income tested, your income is lower, you get more of it. It all comes back to your effective tax rate. This is another form of, it's a government benefit, but when you reduce your income, when you're eligible for this, you're not only reducing your taxes based on your tax bracket, you're also getting a boost in Canada Child Benefit, which ends up being, I don't know what the numbers are, but a massive, in percentage terms, reduction in your tax rate.

43:11Yeah, it's huge. Like I said, in this case, there were years where they were getting$12 ,000 in Canada Child Benefit on a combined household income of 96. So you're looking at a 15 % benefit based on the income that you have. Yeah, it was huge. And so this obviously pushed the retirement scores to astronomical numbers because you just went from saving$3 ,000 a year to your RSPs to saving$6 ,000 to$7 ,000 per person to your investment accounts every single year. And it does improve the RSP scenario. The TFSA with the guaranteed income supplement still wins out at age 95 in this case. So with two kids, the RSP retirement score was in excess of 150%.

43:46And unfortunately, Conquest just truncates it at 150%. It says if your retirement score is over 150%, we're not even going to tell you what it is. It's just so high. I don't know if it's 692 % or 151%, but it was above 150%. But if we In the RSP scenario, present value of the estate, so in today's dollars, was$1.146 million. With the TFSA scenario, with two kids and the GIS, it was 1.166. So it was a$20 ,000 difference in present value terms, which just isn't that huge, right? And again, that's using straight line returns. If we Monte Carlo it, the RSP with two kids, The pass rate in the final year at age 95 was 81.9%.

44:33The TFSA with GIS was 79.4%. So you actually had a higher probability of meeting your retirement goals with the RSP versus the TFSA and the guaranteed income supplement when two kids were involved because of the additional amount I think that you could save to RSPs. Without the GIS, that pass rate score dropped to 76.5 % for the TFSA and the estate value dropped to 5.68 million in future value, which is 983 ,000 in present value. So without the GIS, the TFSA scenario was easily the worst of the scenarios that I ran. And again, the shortfalls were bigger. Anytime there's, across all the analysis that I did, any single time you had to take the guaranteed income supplement, the worst case scenario was worse because you have to take old age security earlier.

45:19It is pretty wild. I won't go too far into the details on the other scenarios I ran, but I did test mortality at age 80. and then also age 105. And yeah, I get it. Like the probability of living to 105 is pretty slim, but again, we're talking to 25 year olds here. Who knows what the future looks like, what our life expectancies are. But if you do live a long life and we don't know in advance, what's better, the RSP or the TFSA, if you die at 80, the RSP becomes generally worse because you have a larger embedded tax bill that's getting taxed at a higher marginal tax rate. So you're dying with a larger RSP balance if you die young.

45:54That's actually really interesting. Yeah. Yeah. So with no kids, death at age 80, RSP retirement score was 121%. Present value of the estate was 162 ,000. In the TFSA scenario with no kids and the guaranteed income supplement, it was, retirement score was well over 150%. Present value of the estate was 841 ,000 versus 162 for the RSP. So multiple of nearly Monte Carlos scores were far greater for the TFSA in that scenario, 90 % versus 66%. But the largest shortfalls were still worse for the GIS scenarios there too. What I came to at the end is the decision between the RSP and the TFSA has probably less to do with your marginal tax rates today and has more to do with A, your belief in whether the guaranteed income supplement will be there for people who have TFSAs only, how many kids you're going to have, and how effectively you can save any government benefits you get in terms of reduction in taxes or income from the government.

46:53And lastly, when you're going to die. Those three factors, it seems to me are largely more important than what your income is. Wow. Pretty interesting stuff. What's the main takeaway? How does this affect advice you give to a client, for example? I mean, that's why we model every client scenario, their individual scenarios, because everybody's different. And we don't know a lot of the variables I'm discussing. Will GIS be there? And when are you going to die? If you tell me when you're going to die, I can design a perfect tax plan for you. But in the absence of that, we have to make some guesses.

47:20But we do a lot of scenario testing, right? And so we can see what the outcomes are. And we should also point out the TFSA is an amazing account. It's super, super flexible. The tax certainty that you get with the TFSA, you already paid your taxes. You never have to worry about taxes again. With the RRSP, you don't know what your future tax rates are going to be or what everyone's future tax rates are going to be. So I think the trade-off, even if the RRSP is mathematically better. The flexibility that's built into the TFSA is excellent. I don't know that I have a rule of thumb, but I would say even at lower incomes, like you probably want to look at, or at least model using both accounts or splitting it half to the RSP and half to the TFSA.

47:55And depends on your goals. Like I'm talking about retirement money here. So if you're going to buy a house next year and that's what you need the money for, of course, that's a totally different discussion. But if we're talking retirement money, I often make this decision or encourage people to make decisions when there's that much uncertainty and one outcome is definitely going to be better than the other and we just have no idea and you're choosing between two things do both right and then anchor to the one that worked out the best so that psychologically you feel good even market timing lump sum investing that kind of stuff invest half now and then invest half later and then just anchor to whichever of those two pots did better one of those scenarios i think super interesting i don't know what do you think ben what do you think investors should do with that i think what you said makes a lot of sense and i think people in low tax brackets or middle tax brackets that are constrained in their ability to save.

48:39So they can't just max out both accounts, which is probably ideal if you can. Having some mix is probably the right thing to do, whether it's 50-50 or some other amount. I know that's also in that Scott Sederberg paper that I mentioned earlier. I think people with low taxable incomes should just use a TFSA in their paper. And otherwise, they had a rule of thumb, I think it was age plus 20 % go into a traditional account and the rest goes into a Roth or a TFSA. Totally different approach to what you're talking about because they are modeling tax rate uncertainty based on historical US tax rates.

49:13But they come to a similar conclusion on having a mix of both account types for where you should be contributing. So I think if there's one big takeaway from your analysis and then to line that up with the Cedarburg stuff, it's that maybe it doesn't make sense in any case for somebody to focus solely on one account, which is often online. You have a low income, you should only use this account. That may not always be true. are correct. Yeah. And people, obviously there's contribution limits to both the RRSPs and the TFSAs, but when you have a fixed amount to save, again, you're looking at a fixed amount that's in your bank account.

49:47You don't need to fill one before the other, right? You can split that deposit in whichever weighting you want to be funding both. So it's not that you have to fund one and then the other. It's not like some sequential order of events. You can simultaneously fund both of them in some different ways. And I agree. A lot of people may not have the income to be able to afford to maximize both. But a lot of people do have the income and don't maximize both. And the amount, it just becomes a nice beacon to strive for each year to keep everything maximized. For many people, it's not that out of reach.

50:15Yes, you'll have to make some spending choices to have the cash flow, but that's what this is, right? Deferred gratification. Instead of spending it now, put it into one of these accounts and I just find the amounts, they're just so nice and clean and strive to do it. And if you do that, you're going to have a pretty good nest dig at the end of the day. Another takeaway might be that the differences weren't huge. At 95, they were pretty small. At 95, it was largely a coin flip. So someone's agonizing over which account to contribute to, and that's causing them not to save or to delay saving because they've got some analysis paralysis.

50:47Maybe it doesn't matter that much. Just put it somewhere. I didn't get into the details, but the death at 105, the death at age 105 scenarios, the RSPs got substantially better than the TFSAs. And so the longer you live, the better the RSP looks versus the TFSA. And the other thing I should mention, I didn't mention this out of the gates, is in the RSP scenario, if there's additional excess income that's above their spending needs in these scenarios, I'm funding the TFSA in retirement, right? So like we've got this$6 ,000 retirement income goal after tax. But when you delay CPP and you delay old age security and then you've got a relatively large RIF balance, your fixed income in the scenarios I ran, the fixed income that they were bringing in after tax exceeded the$6 ,000 retirement target.

51:30So they had excess cash. So this wasn't like trying to maximize their spending. This was with a fixed$6 ,000 a month spending throughout retirement. When there was excess cash, that did go into a TFSA, just not at all while they were working and contributing. So I did that. That was across all three scenarios, all age groups and everything. But the death at age 105 scenario, the RSPs became substantially better basically in every single case. So it seems to me if you die young, the RSP is worse. You have a bigger embedded tax bill. The longer you live, the more you get to spread that tax bill out and the better the RSP has become.

51:59So from that perspective, the RSP becomes a little bit of a longevity hedge versus the TFSA only strategy. Whoa, that's wild. Makes sense though, because you've got more years of low tax brackets to spread out that income. Really interesting. Okay. Good to go to the after show. Let's go. Not a lot of stuff in there, but for three people sticking around, I got a nice note from someone on LinkedIn this week who said, I just wanted to say I've been a fan of the podcast since its first year. Thanks for putting out great content. There's not much of an online for this industry. I'm a new father. And when I'm taking my son out for a walk and he's napping in the stroller, I always binge your content.

52:34And when my friends ask me where to go to learn about investing and personal finance, I send them your way. Wishing you guys continued success. Sincerely, Joel in Norway. Very nice. Nice. Very nice one. I can talk briefly about some stuff that I've been working on. I think I sent it to both of you guys. I won't give away the results yet, but I'll talk about what I've been doing. There's publicly available data on Canadian home price indexes for the country in aggregate, a bunch of provinces, but not all of, maybe I might have all of them actually. No, not all of them, a bunch of cities. So I've got that.

53:07There's also publicly available data on rents, survey-based rents. And the survey data looks at vacant rents, but also occupied rents. Those are different because rents for vacant departments will reflect market rents. rents for occupied apartments will reflect some blend of market rents and old market rents because people that have been in an apartment for a while will be paying in many cases a below market rent. Anyway, so that's the data. And I took those things. I don't know why I didn't do this sooner, but I took those data and reconfigured my rent versus buy model that usually just uses expected numbers, like expected returns and expected inflation and stuff like that.

53:44I reconfigured to take historical data. And I started plugging numbers in for all those regions, all of Canada, provinces, cities. And I'm not going to spoil the results. I'm also a little bit nervous about saying them because I want to spend more time with them first, but mind-blowing stuff. I'll say that. The results are just not what I expected at all. So hopefully next episode, maybe I'll be comfortable enough with that analysis to talk about it, but it's really, really surprising. Very cool. That's my recent content. That's what I've been consuming. So what else is going on? Bachelorhood almost done, Mark?

54:19Yeah. Family's back in eight days. I miss them a bit. I mean, I miss them a ton, sorry, but it's been a bit good for me. I've been working out every single day. I've been eating super healthy. Haven't had a beer in three weeks. Been meditating, going to sleep at 9.30, waking up at 5.30 without an alarm clock. It seems like I'm setting a baseline because I've got two young kids. Life is just chaos when you've got two young kids. So I miss them, but it's been a really good opportunity to just get my own house in order, so to speak. So I'm excited for them to come back and see if I can maintain the same schedule and activities, even though the house is crazier.

54:51I think Ben knows a thing or two about crazy households. Yeah, my house is pretty crazy. All right, though. We've been spending a lot of time at the river over here. That's awesome. Sort of five-minute walk from the Gatineau River. Kids have taken to swimming. Last year, they were all a bit nervous around the water, but they've been in swimming lessons and stuff like that. And then just spending a lot of time down at the river, they've all gotten pretty comfortable. Maybe not every day because the weather's not always permitting, but a few days of the week, every week we've been going down, swimming around.

55:18It's pretty fun. And I hear the water's really warm this year. It's beautiful. Yeah, like in the mid 80s, I think. I have not stuck a thermometer in there, but it feels pretty good. I've heard people say that their lakes are warmer than they've ever seen them around here. I heard some people that were swimming in the river yelling about how it was colder than the lake. So maybe the lakes are warmer than the river. I don't know but it's comfortable enough did i tell you guys that disney filmed the movie in front of my house or a tv show cameron did i tell you this no i saw your tweet on it i realized one morning that is absolutely the most purest form of passive income that i've ever received basically some guy knocked on my door one day and just like hey we're part of this production company and filming down the street from your house in a few weeks and can we use your driveway to store some equipment and i was like yes but do you have a badge or something that proves that this is legit i don't know what to ask for some guys just knocking on my door asking if he can use the driveway and i was like yeah sure he's okay well what's your email what's your phone number and i'm kind of like i don't know this could be some scam that i'm just not aware of but it's nice enough guys i gave my number and sent me over a contract and yeah they offered to pay me 500 bucks use my driveway for four days and get my family's away so i don't really need to drive go anywhere i can go pre-shop all my groceries and stuff i was like yeah i could just stay in my house for four days or just go for walks if I need to get anything.

56:35And I talked to a friend of mine. He's like, 500 bucks for four days. That's way too low. You should get them up. And I was like, okay. So I like started negotiating. I got them up to 1500 bucks for the four days. Come on. 500 for four days wasn't enough? The way that our street works is they had all the trucks parked all down the street. I live next to a forest, like similar to Ben. And they were filming in the forest. And so they needed our street to park all the trucks and all the equipment, the generators and everything like that. But the trail of trucks ended basically at my house. And so I realized that if I try to negotiate too hard, they'll just say no.

57:06And they'll probably just go to my neighbor's house and store the stuff in their driveway instead. So I figured at$1 ,500, I tripled the original offer and left it there. And they said yes. They said, yeah. This guy knocked on my door a few days ago while they were still filming. And it's just like, here's your check. Wow. Pretty cool. That's pretty sweet. And they just packed up and left one night, like in the middle of the night. I woke up the next morning, everything was gone. The trucks, the trailers, the generators, the cables. It was an eerie experience. So you mentioned generators. We decided today we're going to put a generator aside of our house and hook it up to the natural gas.

57:38Just as a backup system or what? As a backup because we always power off enough. We've had enough episodes of, we don't have our freezer jammed with stuff, but enough times where you lose everything. And with the natural gas, we have the space and apparently it's super easy to put it in. So we're doing it. Decided that this afternoon. It serves our big financial decision of the day. You have one, right, Ben? Not a fancy one. I've got a pull start one that I have an extension cord that I can plug into my office. But it does a trick, right? And then run around enough to plug the fridge into or not enough?

58:08Yeah, it is. But our fridge is a hassle to pull out. So we usually just plug the freezer in. Works well enough. We're going to get one like what you're talking about too. I don't know when we're going to do it. Or at the very least a transfer. We lose power out here quite a bit too. It's never that bad, but it's happened enough. There's a thing called a transfer switch. So I might just get one of those instead of the really fancy generator because those are pretty pricey. But I don't know. Interesting. here mentally gone through the zombie apocalypse scenario try to figure out okay what do we do that we survive the zombie apocalypse i'm just the least prepared person in the world for that but my best friend is the most prepared person in the world for that so when he came over last time he's like what's your plan when that happens my plan is to take my whole family and go to your house dude like you've got all of the canned fish you've got all the ammunition you've got the generators you've got the boat you've got everything all set up for that like i don't need to recreate that in my house i'm just coming over to your house when that happens yeah i don't have that much preparation we have really good camping equipment so whenever the power goes out we still have a gas cooking stove we can pull out and stuff like that we've gotten pretty good at dealing with power that are just here but it would be just easier to have a generator okay from rsp versus tfsa to zombie apocalypse important stuff we covered all okay guys that's a wrap thanks for listening

59:28Thank you.