Our response:
We can’t provide advice but try to provide general information to help take the next step. Both a Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Accounts (TFSA) offer tax advantages to help you reach your savings goals. The main differences are:
- An RRSP is usually used for retirement savings. A TFSA can be for any type of savings goal.
- Your RRSP contributions are tax deductible. TFSA contributions are not. You need earned income to contribute to an RRSP but not to a TFSA.
- You pay tax on your RRSP withdrawals because you contribute with pre-tax dollars. TFSA withdrawals are tax free because you made the contributions with after-tax dollars.
- You must close your RRSP the year you turn 71. At that time, you have to use your savings to buy either a RRIF or an annuity. With a TFSA, you don’t have to stop contributing, or close it, at a certain age.
Non-registered investment accounts have no special “tax status”. All investments held in non-registered accounts are subject to tax. Find out more about investors and tax. Speak to your registered financial advisor or tax professional about options that fit your specific financial situation.