FP Answers: Should I allocate a $75,000 inheritance to my RRSP or my TFSA?

financialpost.com:

By Julie Cazzin with Janet Gray

Q: I am 45 years old, earn $75,000 annually and do not have a registered retirement savings plan (RRSP) or tax-free savings account (TFSA). I’m not married, and my condo is now fully paid. I recently inherited $75,000. Can you please advise me if this money should be placed as a split (50/50) between the RRSP and TFSA? Or should it all be put into just one of these accounts? Is there something else I should be doing with this money?

FP Answers: Melinda, when someone receives sudden money, it’s a good opportunity to consider the most efficient and prudent way to use the funds. Planning should always start with putting your final goal in sight. Ask yourself a few questions: What outcomes would you prefer? Do you want to retire early? Do you want to buy a new car or do some travelling?

The truth is that goals are key to indicating which investment to choose and often the type of account to choose. For example, if you have a shorter-term goal — meaning a goal you want to accomplish within six to 12 months — then cash is the best choice. If the funds are needed within the next one to five years, consider a guaranteed investment certificate (GIC) with a timeline matched to the intended use. The job of these investments is to protect the value of the money until you are ready to use it.

If the money is to be used for a longer-term goal (more than five years away), then your aim is to invest the money so it grows over several years. Equity investments are better for longer-term investment simply because returns often go up over a longer time period despite the volatility and general ups and downs of the equity markets.

The choice of what type of account to use for your goals and investments —