At a Glance
Millions of Canadians struggle with deciding whether to invest in a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP). While each helps you save, they each work a little differently.
A TFSA is a registered savings account for gains that are not taxed. Contributions to the TFSA accounts each year are limited and all withdrawals from a TFSA are tax-free.
Self-employed people and employees in Canada use RRSPs as savings and investment vehicles for retirement. Unlike the TFSA, RRSP savings are taxed after retirement.
Which way for you?
The ideal option will depend on individual financial goals and the future that you want for your team. Some employees will prefer paying taxes today and sparing themselves future taxes, since rates might have shot by retirement time. Others prefer getting a tax refund today before they start saving and pay taxes later during retirement.
Depending on individual choices, income, investment timelines and more, one should be able to pick their suitable retirement plan with ease. But in case you're still at crossroads, you'll be happy to know that you can subscribe to both plans (TFSA and RRSP) simultaneously without having to miss out on the benefits of either of them.