I'm in Quebec and run a sole proprietorship. Far away from retirement. About $85,000 income in the 2015 tax year. I have around $48000 to invest. No TFSA or RRSP yet.
So my main priority is having a short to medium term savings buffer that will give me time to start a new business if my current field vanishes.
So far I'd just been saving that in regular accounts. But it occurred to me that it might make sense to deposit about $12,000 into an RRSP, and put the rest in a TFSA.
1. If business stays good, I just keep it there till retirement.
2. If business vanishes, I can remove it and pay a 0% tax rate by keeping it under the personal exemption
3. I'd then use my TFSA/regular savings for the rest of my living expenses.
Doing this would let me expand the pool of money to draw on in case of crisis. Is this a good strategy?
Notes:
- I expect to earn more money in later years, but
- I'm in an industry based around another company's business. My income could vanish entirely if that company changed policy.
So my main priority is having a short to medium term savings buffer that will give me time to start a new business if my current field vanishes.
So far I'd just been saving that in regular accounts. But it occurred to me that it might make sense to deposit about $12,000 into an RRSP, and put the rest in a TFSA.
1. If business stays good, I just keep it there till retirement.
2. If business vanishes, I can remove it and pay a 0% tax rate by keeping it under the personal exemption
3. I'd then use my TFSA/regular savings for the rest of my living expenses.
Doing this would let me expand the pool of money to draw on in case of crisis. Is this a good strategy?
Notes:
- I'm aware of the witholding tax. I'd just get that back with the following year's refund. Not an issue since I'd have other savings.
- Keep in mind that far and away my #1 priority is having enough savings that I could start another business rather than take a job.