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RRSP, TFSA or both? It's Worth a Talk

    CIBC's Jamie Golombek on choosing the right investment solution

    TORONTO, Feb. 9 /CNW/ - With the March 2nd RRSP contribution deadline
only a few weeks away, it's time for investors to choose where they will be
putting their money. While the RRSP has long been the go-to retirement
planning solution for most Canadians, the arrival of the Tax-Free Savings
Account, or 'TFSA', in 2009 has presented investors with a new savings
    "Let your personal financial goals help you determine what course of
action to take this RRSP season," advises Jamie Golombek, Managing Director of
Tax and Estate Planning for CIBC. "Retirement may be top of mind for some but
a long way off for others who are thinking about major purchases or a child's
education. You have to factor in your tax rates, liquidity and your investment
horizon before investing your money."
    To help investors decide, Golombek offers the basics on both plans and
suggestions for who they suit best:Why TFSA?
    Clients 18 or older can contribute up to $5,000 annually to a TFSA and
invest in cash deposits, GICs, mutual funds and other investment vehicles.
Other characteristics of the plan are:

    -   Your earnings and withdrawals are tax-free
    -   You can make withdrawals at any time (depending on the investments
        chosen), for any reason
    -   Funds withdrawn can be re-contributed beginning the following year
    -   Withdrawals don't affect your eligibility for federal income-tested
        government benefits such as the GST credit or Old Age Security
    -   Any unused contribution room can be carried forward from year to year
    -   Contributions are not tax-deductible

    "This is a highly liquid, very flexible plan - ideal for using as an
emergency or 'rainy day' fund," says Golombek. "It's great for clients looking
to save for a major purchase as well as for those who have maxed out their
RRSP contribution and are looking to invest an additional $5,000."

    Why RRSP?
    Clients earn tax-deferred compound growth on cash, GICs, mutual funds or
other qualifying investments held within an RRSP. To claim a deduction for the
2008 tax year, clients can contribute 18% of income earned in 2007, up to a
maximum of $20,000 (less any pension adjustment plus carryforward of
previously unused RRSP contribution room). Other features of the RRSP include:

    -   Your contributions are tax-deductible
    -   Income earned in your RRSP is tax-sheltered until withdrawn
    -   Your unused contribution room can be carried forward indefinitely
    -   Some funds may be accessed tax-free to buy a first home or pursue
        post-secondary education
    -   Income splitting upon retirement can be achieved through a spousal
        RRSP before age 65 as opposed to pension income splitting from a
        RRIF, which can only be accomplished from age 65"For those approaching retirement who expect to retire to a reduced
income and taxation level, the RRSP should take precedence over TFSAs," says
Golombek. "However, RRSP holders who are able to dedicate more than their
annual contribution limit towards retirement should consider opening a TFSA as
well to put aside an extra $5,000 a year, tax-free."
    Golombek also urges clients to consider the liquidity of the plan they
choose. "Could you see yourself relying on your investments in a financial
emergency? If so, you should weigh the potential tax repercussions such a
withdrawal could have," says Golombek. "TFSAs allow investors to withdraw from
the account tax-free at any time but pre-mature RRSP withdrawals are
immediately taxable, could result in the temporary loss of income-tested
benefits and permanently reduce contribution room which cannot be recovered."
    And Golombek's final piece of advice is to consult a financial
professional. "If you're unsure about your options, talk to a financial
advisor. You're unique and so are your goals and an advisor can work with you
to develop a long-term financial plan tailored to you."
    For more information please visit your nearest CIBC branch or

    CIBC is a leading North American financial institution with nearly 11
million personal banking and business clients. CIBC offers a full range of
products and services through its comprehensive electronic banking network,
branches and offices across Canada, in the United States and around the world.
You can find other news releases and information about CIBC in our Press
Centre on our corporate website at

For further information:
For further information: Doug Maybee, Director, External Communications
and Media Relations, CIBC, Tel: (416) 980-7458,