We know that both TFSAs and RRSPs allow us to save money, but in what situations would one be more beneficial than the other?
Tax Free Savings Accounts (TFSAs) let you grow your money and invest for both short and long-term goals with no effect on taxable income. While Registered Retirement Savings Plan (RRSPs) are a personal savings plan that allows for you to save for retirement with the bonus of tax benefits.
Let’s look at the feature differences between the two accounts:
|– No effect on taxable income||– Tax receipt for contributions |
lowers taxable income
|– Tax deferred growth||– Tax deferred growth|
|– No tax on withdrawals||– Withdrawals are taxed as |
|– Start building your nest egg at |
|– No age limit to start building |
your nest egg
|– Don’t need earned income to |
|– Need earned income to |
|– Account may remain open |
indefinitely with no maximum age
|– At age 71 RRSP contributions end |
and must be withdrawn or
transferred to a
Registered Retirement Income
TFSAs are flexible, and you can deposit or withdraw for purposes such as emergency funds, down payments on a home, retirement, etc. All the contributions are not tax deductible and any unused money can be carried forward.
RRSPs are meant specifically to save for retirement but can be used for first time home buyers and funding post-secondary education provided they are paid back within a given period. Contributions are tax deductible and any unused money can be carried forward.
Curious which one would help you reach your financial goals? Contact one of our Member Advisors to start your investment journey today.