Quote:
Originally Posted by Regorium
Someone said somewhere that investing 50k into the RESP on year 1 outperforms the 20% match.
Thoughts?
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Is this persons TFSA and RRSP maxed at this point? If the answer is no then a person is better filling up their TFSA with the 50k and then selling to fund the $2500 Over the years. In this case all growth is tax deferred and you get grant money.
But let’s say you tfsa is maxed you have 50k invested a 7% ROR and a 48% marginal rate
Option 1) 50500 invested for 18 years at 7% you get 157k
Option 2) 17500 invested upfront, 2500 per year remaining 32500 invested with 2500 after tax being sold each year to fund RESP
This gives you 131k in your RESP and if I did the tax part of the capita gains correctly about 27k after you sell your investment leaving you with the exact same amount except that the money invested in the RESP is still taxable to your child and if removed in 4-6 years you would be above the basic exemption amounts so your child would incur a small amount of taxes.
So I don’t see it making sense to invest 50k upfront even in the top tax bracket. Closer than I thought it would be.