TFSA or RRSP – that is the question

They’re both good saving tools with their own sets of perks. Find out which is best for you.

Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) are both useful savings tools, but it’s their purposes that makes them different. RRSPs work best for retirement saving, while TFSAs are more flexible and better suited for short, medium or long-term saving. TFSAs are also exempt from taxes in a way that RRSPs simply aren’t.

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What’s so great about RRSPs?

  • Tax deductions! Contributions you make to your RRSP actually reduce your taxable income for the year, so at tax time you could get a refund. You can use that refund for whatever you’d like, like more saving.
  • You can contribute to your spouse, or common-law partner’s, RRSP. They get the contribution, but you get the tax deduction and it comes off your contribution room.
  • Your RRSP contribution room is based on your income (up to a limit), and many Canadians will gain a lot more RRSP contribution room each year than TFSA contribution room.
  • You don’t pay tax on the money in your RRSP until you start withdrawing it, so you have an incentive to leave it where it is until you retire and your income level goes down.
  • You can get started on an RRSP as soon as you start earning income. With a TFSA you need to wait until you’re 18 years old.

What’s so great about TFSAs?

  • They’re tax free! Your TFSA is completely tax sheltered. You can withdraw your money at any point and there’s no tax on any of your earnings. On the flip side, there’s no tax deductions for TFSA contributions.
  • You can move money in and out of your TFSA without any long-term effect on your contribution limit. This makes your TFSA more flexible than an RRSP, and better suited for shorter-term saving.
  • You get more contribution room every year after age 18. We all get the same contribution amount – your income level has no effect whatsoever.

I'd like to talk to an advisor. Book an appointment. One of the great things about TFSAs and RRSPs is that you don’t have to choose one or the other – you can do a bit of both!

If you have questions about RRSPs, TFSAs or any other investment tools, give our Contact Centre a call at 1.866.863.6237. We’re available 7 days a week to help you! 

Invest online 
If you’re ready to go, you can get started on your TFSA or RRSP right now through online banking. Simply log in to online banking, select “Open New Products” from the left-side menu and follow the prompts to invest. 

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