It isn't that black and white. For example, in Canada, I can contribute a certain amount into a tax-free savings account each year.
TFSAs can be created to hold ETFs, Mutual Funds and other types of investments. I can contribute $6k for 2020, and the total I can hold in TFSA is $69,500. I can contribute more annually as long as my total is under $69.5k.
With a raise, I can accelerate my contributions and continue to enjoy tax-free gains on it. My personal average income tax rate might go up, but that's offset to an extent by whatever returns I'm making through my portfolio.
> I can contribute $6k for 2020, and the total I can hold in TFSA is $69,500
As of 2020, the total you can contribute into a TFSA over your lifetime is $69500. But it's not a limit of what can exist in your account. Gains you make in the account do not count toward your limit.
No, that's not how it works. It is a marginal tax bracket. If you get in the higher bracket, it's only the new money that gets taxed at the higher rate, not your full salary.
It has absolutely nothing to do with your contribution to retirement accounts. You can invest more and contribute more to your tax free retirement accounts with a higher salary (up to a point) but even if you didn't, that wouldn't make a difference.
I'm aware of how marginal tax rates are applied. That's why I said "while my average tax rate may increase" (in a hypothetical situation), I can still net more overall due to increase in the absolute $ return on the TFSA portfolio.
I'm responding with respect to the OP's comment about beign bumped into a higher marginal tax bracket. Just because you are, doesn't mean you'll automatically end up with less discretionary income.
I feel like I'm misreading this, but regardless of whatever investments you have, you'd come out with more as your income increases into higher marginal tax brackets correct? As in, if I was making 94k and got a raise to 98k, I'd come out with more regardless of what's in my TFSA.
TFSAs can be created to hold ETFs, Mutual Funds and other types of investments. I can contribute $6k for 2020, and the total I can hold in TFSA is $69,500. I can contribute more annually as long as my total is under $69.5k.
With a raise, I can accelerate my contributions and continue to enjoy tax-free gains on it. My personal average income tax rate might go up, but that's offset to an extent by whatever returns I'm making through my portfolio.