TFSA or RRSP? Where should you put your money?
It’s that time of the year where the RRSP deadline is upon us and everyone will be planning on where to invest their money. Depending on what you’re saving for, where you keep your money makes a difference.
Welcome to the TFSA vs RRSP showdown. See how each plan type works so you know where to put your money.
TFSA | RRSP | |
When can you start saving? | You have to be at least 18 years old | You can save in an RRSP the year after you start making money |
What’s it best for? | Any savings goal whether it’s short term or long term | Long term retirement savings |
What happens when you take the money out? | You can take out the money tax free | Anything you take out counts as taxable income for the year. There are some exceptions for the Lifelong Learning Plan or Home Buyers Plan |
How can you save? | You can set up automatic or lump-sum contributions with after-tax income | You can save with pre-tax income through payroll contributions or after-tax income if you set up automatic or lump sum contributions through your bank account |
Are there any benefits? | You don’t have to pay taxes on your contributions or any income earned when you take the money out | Contributions reduce your taxable income for that year, which means you could pay less income taxes. Also, any income earned within the RRSP is tax deferred |
Is there a Limit to how much you can save? | The limit for 2019 is $6000, plus any contribution room you have not used from previous years | The 2019 limit is 18% of your pre-tax income or $26,500- whichever is less plus any contribution room you haven’t used from previous years |
This article is for information purposes and should not be viewed as professional advice. We suggest that you seek professional advice based on your personal circumstances with your financial advisor.