Should I Invest In an RRSP or TFSA?

Both a Registered Retirement Saving Plan (RRSP) and a Tax Free Savings Account (TFSA) are excellent saving vehicles. They have similarities and differences.

An RRSP is tax deferred, meaning you will pay taxes when you withdraw the funds. Whatever you deposit to an RRSP is deducted from your income. As a result, there is a nice tax deduction on the money you deposit now, leading to a reduction in the tax you pay, and possibly a tax refund. The money deposited to your RRSP grows without you paying tax. However, when you withdraw the funds (and you must do so at some point) you are then taxed as if the money was income.

With a TFSA you do not get that nice tax deduction when you deposit your funds, like you do with an RRSP. Similar to an RRSP the money grows within your account without you having to pay tax. Unlike an RRSP, you do not have to withdraw the funds, but if you do, you withdraw them without paying tax. It truly is tax free.

Since most people expect to be earning less in retirement, an RRSP usually makes sense when you are working and earning more, to take advantage of that tax deduction. If you have a low income or you are more concerned about paying taxes in the future, a TFSA might make sense. There are also limits on contributions and other details. Since everyone’s situation is different, it’s best to discuss your needs with a financial advisor.

For over 20 years as a financial advisor in Toronto, Francine has helped hundreds of families in the GTA. Clients appreciate her non-judgemental approach, as well as her patience and open mindedness. Currently, she specializes in working with women transitioning into retirement. She has been an advisor with Carte Financial Services Inc. and Carte Wealth Management Inc. since the summer of 2016 where independence allows her to provide the best service and products to her clients. Contact Francine through