TFSA vs. RRSP: Which is Right for You?
When it comes to saving and investing in Canada, two of the most powerful tax-advantaged accounts are the Tax-Free Savings Account (TFSA) and the Registered Retirement Savings Plan (RRSP). While both accounts help you grow your wealth, they have key differences in tax treatment, contribution limits, and ideal use cases.
What is a TFSA?
A Tax-Free Savings Account (TFSA) is a flexible investment account where your contributions are made with after-tax dollars, and your investment growth is completely tax-free.
- Contributions are not tax-deductible
- Withdrawals are tax-free
- Contribution room carries forward
- Withdrawals restore contribution room
What is an RRSP?
A Registered Retirement Savings Plan (RRSP) is designed for long-term retirement savings. Contributions reduce your taxable income, helping you lower your tax bill in the year you contribute.
- Contributions are tax-deductible
- Investment growth is tax-sheltered
- Withdrawals are taxed as income
- Contribution room based on income
Key Differences (2025)
When to Use Each Account
Choose TFSA When
- You're in a low to moderate tax bracket
- You want tax-free withdrawals
- You need flexibility
- You're saving for various goals
Choose RRSP When
- You're in a high tax bracket
- You want immediate tax savings
- You're focused on retirement
- You want spousal transfer options
Using Both Accounts
Many Canadians maximize both their TFSA and RRSP for tax-efficient wealth building:
- Use an RRSP for high-income years to reduce taxable income
- Use a TFSA for accessible, tax-free savings and withdrawals in retirement
- Withdraw RRSP funds first in retirement, then use TFSA withdrawals tax-free to minimize taxes
Need Help with Your Investment Strategy?
At Altiora Wealth Management, we help individuals and families in Fredericton, New Brunswick, and across Atlantic Canada create customized investment plans that balance RRSP and TFSA contributions for maximum benefit.
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