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RRSP Vs. TFSA – Which One is Right For You?

First, let’s determine the difference between the two – 


RRSPs – intended specifically as a retirement savings plan

·         Contributions are tax deductible
·         Maximum contribution: 18% of earned income or $22,970
·         Cashed RRSPs treated as earned income and taxed
·         Age limit for making contributions – 71 years of age



TFSAs – can be used to save for anything (retirement, home, car, vacation etc.)

·         Contributions are not tax deductible
·         Maximum contribution: $5,500/year, regardless of your income
·         Withdrawals are not taxed
·         No age limit to making contributions



      Which option is better for you?


Higher marginal rate today – invest in RRSP first. Generally speaking, RRSPs are better for high-income earners ($70,000+).


Higher marginal rate in retirement than today, then invest in TFSA. TFSAs are better suited for lower-income earners.