Investing thoughts and ideas

This is something that I have wondered if I can work or not to maximize a return on investment. Right now Canadian tax payers are allowed to put $5000 a year towards a tax free savings account. Since its inception last year we are allowed up to $10K right now. With that thought I always wondered if it would work to people with a lower income but need to also maximize their RRSP could they use both tools to maximize both sides and end up having each fund themselves.

Here is the concept, since you are allowed also to invest in funds and other types of investments in a TSFA why not put the money in a investment fund that pays out an income each month. Say you can find a fund that can pay out from 0.5% to 1% each month. That will mean if you can max out your TSFA you get between $50 to $100 each month. Looking at many fund companies it is a realistic return each month. Check out the various banks for their income funds. Some do average this rate.

From each month payout put that towards your RRSP. Now you may say why put it in a defferred tax investment that you get taxed on when you withdraw. But the advantage I find with this is you can use the return each year to fund your next year TFSA. In reality you are not going to take the RRSP money out right away so really you can grow it there and have the return you get each year to go into something that can grow tax free.

The idea is that as each year passes you can have more in your TFSA that can be used to purchase more in your RRSP. Then one day you will get to the point where each will max out and you can just let it sit. Hopefully by that point the income in the TFSA can grow that you can have extra income ontop of maxing out your RRSP.

From this point you will be looking at the TFSA as an income source and buying time to your retirement with a nice tax free nest egg that won't count towards your income total when you withdraw your RRSP.

Just a thought but I have to thing about it more and map it out with some calculations.