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RRSPS vs TFSAS what are they and what are the differences that you should be aware of before choosing either one. Which one should you be contributing to each year and why?


A Registered Retirement Savings Plan (RRSP) is a savings plan that is registered with the Canadian Federal Government. It is a savings plan that allows you to contribute for your retirement. An RRSP allows you to defer your taxes until a later date. It is not a Tax-Free account. You will be taxed when you withdraw funds from an RRSP account.


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Rebecca C Penner CPA, CGA https://rcpenner.com/contact


A TFSA account is a Tax – Free savings account that you can contribute to and not have to pay tax on the amount that you withdraw. Because of the high tax implications with an RRSP, I wouldn’t recommend contributing to an RRSP 100% of the time. Unless your income is on the higher end.

Let’s take a look at 4 TFSA tips:

1. Planning for your retirement – No matter what age you are, be that in your 20s or 50s, planning for when you retire is an important part of being financially responsible. Determine what kind of lifestyle you want to live in your retirement years and set goals accordingly. Your financial advisor can help you with this.

2. There is a limit amount that you can contribute each year to your TFSA account. The limit for 2021 was $6000. Which is the same for this year 2022.

3. Contributing to your TFSA account as early as possible gives your money more time to benefit from tax-sheltered growth.

4. Unused contribution room can be carried forward to use in future years.


Screen Shot 2022 04 15 at 7.51.27 AMRebecca C Penner CPA, CGAhttps://rcpenner.com/contact


How can you make your TFSA account successful? In general, you should aim to contribute to your TFSA each year. Ideally if you can start contributing in your early 20s you could end up with a very comfortable retirement later on.

When you’re in your 50s a good gauge for assessing your retirement, readiness is to have saved seven times your annual income by the age of 55. So, the earlier you start your investment journey the earlier you will be able to retire and enjoy your life on your terms.

A good place to start if you are in need of financial advice is to contact a financial advisor. Your accountant would be able to help you with this and point you in the right direction.

Thank you for taking the time to read my article.

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Rebecca C Penner CPA, CGA

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