Ms. Chen, aged 45, is evaluating her retirement savings options. She expects to be in a high tax bracket during her working years and a lower tax bracket in retirement. Her priority is tax-efficient growth and income. Which Canadian registered account is generally most suitable for her current situation?

Question: Ms. Chen, aged 45, is evaluating her retirement savings options. She expects to be in a high tax bracket during her working years and a lower tax bracket in retirement. Her priority is tax-efficient growth and income. Which Canadian registered account is generally most suitable for her current situation?

Answer options:

• Tax-Free Savings Account (TFSA) due to tax-free withdrawals in retirement. ✅ Registered Retirement Savings Plan (RRSP) due to the immediate tax deduction on contributions and tax-deferred growth.
• Non-registered investment account for maximum flexibility and no contribution limits.
• Registered Education Savings Plan (RESP) to benefit from government grants for future education needs.

Correct answer: Registered Retirement Savings Plan (RRSP) due to the immediate tax deduction on contributions and tax-deferred growth.

Explanation: Given Ms. Chen's expectation of being in a high tax bracket now and a lower bracket in retirement, the RRSP is ideal. Contributions provide an immediate tax deduction at her higher marginal rate, and funds grow tax-deferred until withdrawn in retirement, when they will be taxed at her lower marginal rate, maximizing tax arbitrage.