Compare TFSA and RRSP Canadians have had the option to save money in a new type of account where earnings are tax free. The calculator below is designed to help you understand how the TFSA can help grow your savings faster compared to a regular savings account where the earnings are taxable.
Compare TFSA and RRSP many benefits that can help people save for short and long-term goals. They can be used to save for any goal, and the investments that are held inside them are not subject to income tax on withdrawals. They can also be used to supplement a retirement savings plan.
If you have the option to max out your TFSA each year, it can be used to provide some extra padding for your retirement. But if you’re not in the position to do so, it might be better to take advantage of the tax advantages offered by an RRSP.
Compare TFSA and RRSP Accounts: Tax Savings, Growth, and Withdrawals Explained
Both accounts have their own set of advantages but which one is right for you? The answer comes down to your marginal tax rate and when you expect to retire.
During early career years, an RRSP is usually more beneficial. This is because the contributions made are tax deductible, and it is likely you have a lower marginal tax rate than later on in your career. But once you’re closer to retirement, a TFSA is usually a better choice. This is because TFSA withdrawals are tax free and there’s no requirement to replace the funds.