TFSA vs. RRSP

TFSA or RRSP? 

As financial advisors, one of the most common question we get around this time of year is whether a TFSA or an RRSP is a better.  There isn’t any hard and fast answer. Both have pros and cons, but overall it depends on your own financial situation. Below is a chart that compares the two.

	TFSA	RRSP
Primary Purpose	Saving for any purpose	Retirement savings, home purchase or education
Annual contribution limit	$5,500 PLUS amounts withdrawn in previous years	18% of previous year’s earned income (Max limits apply), less any pension adjustments
Contributions	Not tax-deductible	Tax- deductible
Unused contribution room	Carried forward	Carried forward
Growth	Tax-free	Tax-deductible
Withdrawals	You are not taxed on withdrawals. Withdrawals do not affect federal income-tested government benefits such as Old Age Security	Withdrawals are taxed as income at your marginal rate. Withdrawals are counted as income and may affect federal benefits such as Old Age Security
Withdrawn amounts	Added to contribution room in future years	Contribution room is lost for the amounts you withdraw
Plan maturity	None; no upper age limits on contributions	End of year when you turn 71
Spousal plan	N/A	You can contribute directly to a spousal RRSP
Eligible investments	You can hold savings accounts, GIC’s, mutual funds, segregated funds, stocks, bonds	You can hold savings accounts, GIC’s, mutual funds, segregated funds, stocks, bonds
Age Minimum	18	N/A

Want a better idea of which is better for you? Try TaxTips TFSA vs. RRSP calculator. This calculator can help give you a better idea of which is right for you based on your unique financial situation. The calculator can be found here: TFSA vs. RRSP calculator.

If you need advice on your savings plan, reach out to us today!