I'm often asked about the best savings strategies for 2025 and the usual suspects are TFSA, RRSP or debt reduction. Here are some considerations.

 

The 2025 Tax Free Savings Account (TFSA) contribution limit is $7,000, with a cumulative total contribution room of $102,000 for those eligible since 2009. TFSAs offer tax-free growth and flexible withdrawals. Registered Retirement Savings Plans (RRSPs) provide tax deductions and tax-deferred growth. They're particularly advantageous for high-income earners and are most effective when you contribute at a higher tax bracket than you withdraw at. Debt re-payment (e.g. mortgage, line of credit and credit cards) may look less attractive with rates expected to continue decreasing. However, reducing debt offers long-term benefits and peace of mind. 

 

 Some factors to consider are:

1. Income level: Higher incomes benefit more from RRSP contributions due to greater tax savings if tax rate expected to be lower in retirement.  If tax rate expected to be higher in retirement, TFSA will have better after-tax rate of return.
2. Interest rates/ Investment returns: Compare long-term rate expectations with potential investment returns.
3. Type of debt: Prioritize high-interest debts before anything else.
4. Other retirement income: If you have a pension, debt repayment might be more beneficial.

These final three options may provide the highest tax benefit but will not apply to everyone. The First Home Savings Account (FHSA) is for those saving for a first home. The Registered Educations Savings Plan (RESP) is for those with children who they expect will attend post-secondary education. The Registered Disability Savings Plan (RDSP) is for those who qualify for the Disability Tax Credit and are under 60 years old.

 

We use software that can compare the different options for your specific circumstance.  This helps to ensure our clients are making the most of the money they save.

 

Please give me a call if you would like to assess your strategy and how I can help. 

 

Fraser Willson, CFP, CIM | Senior Wealth Advisor | (647) 588-4344

CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc. Fraser is an Investment Advisor with CIBC Wood Gundy in Collingwood. The views of Fraser do not necessarily reflect those of CIBC World Markets Inc. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.