Where should my savings go? RRSP or TFSA
Should I contribute to my RRSP or TFSA? It’s a common question on the mind of many Canadians this time of year, and while more often than not, the answer is a resounding yes, there are situations that call for pause and further evaluation. If you’re a millennial just starting your career, a boomer planning to retire or a business owner, we can help.
What's the difference between RRSP and TFSA?
| Registered Retirement Savings Plan (RRSP) | Tax Free Savings Account (TFSA) |
| Contributions are tax-deductible. | Contributions are not tax-deductible. |
| Contributions may lead to a tax refund. | No tax refund on contributions. |
| Investments grow tax-deferred. | Investments grow tax-free. |
| Withdrawals are taxable. | Withdrawals are tax-free. |
| Withdrawals do not create new contribution room, room is lost. | Withdrawals create new contribution room in the following year. |
| Required conversion to an RRIF at age 71, minimum RRIF withdrawals at age 72. | No maturity date, no required withdrawals. |
| Contributions are no longer permitted for individuals older than age 71. | No maximum age, contributions permitted over the lifetime of the individual. |
TFSAs and RRSPs are proven as excellent vehicles for your retirement savings that can be extremely tax efficient and definitely warrant your consideration. Each family’s financial situation is unique, we have prepared a case study with three unique situations to help you make better decisions. Download your free case study today!