Alto, Chang and Associates Financial Management
  • HOME
  • ABOUT
    • ABOUT
    • PRIVACY & TERMS OF USE
  • SERVICES
    • BUSINESS
      • BUSINESS CONTINUATION
      • BUSINESS SUCCESSION
      • EXECUTIVE BENEFITS
      • GROUP BENEFITS
    • LIFE STAGES
      • STARTING YOUR CAREER
      • GROWING FAMILIES
      • MATURING FAMILIES
      • PREPARING FOR RETIREMENT
      • RETIREES
    • INSURANCE
      • LIFE INSURANCE
      • DISABILITY INSURANCE
      • CRITICAL ILLNESS INSURANCE
      • LONG TERM CARE
      • TRAVEL INSURANCE
      • FLEXCARE, ASSOCIATION, HEALTH AND DENTAL PLANS
    • INVESTMENTS
      • Tax Free Savings Account
      • Segregated Fund
      • Registered Retirement Savings Program
      • Registered Education Savings Plan
      • Registered Retirement Income Fund
      • Registered Disability Savings Plan
  • RESOURCES
  • BLOG
  • CONTACT
  • Search
  • Menu Menu
  • LinkedIn

Comparing TFSAs and RRSPs

February 1, 2018/in Family, Individuals, Investment, Retirees, RRSP, tax, Tax Free Savings Account /by Alto, Chang and Associates Financial Management

If you are seeking ways to save in the most tax-efficient manner available, TFSAs and RRSPs can both be effective options for you to achieve your savings goals more quickly. However, each plan does have distinct differences and advantages / disadvantages. Let’s take a look at their key features:

  • While a TFSA can be used for any type of savings, an RRSP is used exclusively for retirement savings.
  • You can enjoy tax free withdrawals from your TFSA due to the fact that you make your contributions after you have paid tax, whereas the opposite is true for withdrawals from your RRSP (except in the case of lifelong learning plan and home buyers’ plan)
  • TFSA contributions aren’t tax deductible whereas RRSP contributions are i.e. with an RRSP, you can deduct the contributions that you make from your income when you file your tax return.
  • It is required that you use earned income to contribute towards your RRSP but this is not the case for your TFSA.
  • You can continue to contribute towards your TFSA for as long as you like, whereas you must close your RRSP and stop contributing towards it when you turn 71 and purchase an annuity or convert it to a RRIF with the savings that you have made within the plan.
  • You are able to specify your spouse as your beneficiary with both your TFSA and your RRSP, however there is a key difference with how your savings are treated upon your spouse’s death. With an RRSP, there will be taxes payable upon the monies left in the plan by your children who inherit it, whereas with a TFSA, tax is only paid on the increase in the value of the plan since the date of death in the year that it is inherited by your children. What’s more, no tax is payable if the value that they receive is less than the value of the TFSA at the time of death.

In summary, your individual circumstances will dictate which plan is the most appropriate for you, depending on your tax position and withdrawal intentions. The primary difference between both plans is the timing of the taxes payable i.e. if you want to defer the payment of your taxes, particularly if your marginal tax rate will be lower in retirement, an RRSP may be more beneficial for you. Alternatively, if your marginal tax rate will be higher when you plan to make withdrawals, a TFSA may suit you better.

Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on LinkedIn
  • Share by Mail
https://acafinancial.ca/wp-content/uploads/2018/02/ComparingTFSAandRRSP-1.png 800 800 Alto, Chang and Associates Financial Management https://acafinancial.ca/wp-content/uploads/2017/12/altoChangAssociatesLogo-1-300x138.png Alto, Chang and Associates Financial Management2018-02-01 15:00:002018-02-01 15:03:53Comparing TFSAs and RRSPs

Search Blog Posts

Categories

  • 2019 Only
  • 2020
  • 2020 Only
  • 2021
  • 2022
  • 2022 Only
  • 2023
  • Accountants
  • blog
  • Business Owners
  • business owners
  • Buy Sell
  • Charitable Gifting
  • Coronavirus
  • Coronavirus – Associates
  • Coronavirus – Practice Owners
  • Coronavirus – Retired
  • Coronavirus – Retiring
  • Coronavirus – Students
  • corporate
  • critical illness insurance
  • Debt
  • dental benefits
  • disability
  • disability insurance
  • education
  • Estate Planning
  • Families
  • Family
  • financial advice
  • Financial Planning
  • Group Benefits
  • health benefits
  • incorporated professionals
  • Individuals
  • Insurance
  • Investment
  • Investments
  • life insurance
  • long term care
  • mortgage
  • pension plan
  • personal finances
  • Professional Corporations
  • RDSP
  • Registered Education Savings Plan
  • RESP
  • Retirees
  • Retirement
  • Retirement Savings
  • RRSP
  • Savings
  • tax
  • Tax Free Savings Account
  • travel insurance

Tags

assets beneficiary blog business business owners business succession cash flow children debt Education estate estate planning families family security Financial Planning funeral expenses income individuals Insurance investment key person Life Insurance marital status Mortgage Registered Retirement Savings Plan RESP retirement retirement contribution room RRSP Savings smoking starting a family tax tax free savings account TFSA

Contact Us

Tony Chang
Financial Advisor

(604) 980-6661
clientservice@acafinancial.ca

North Vancouver Office:

500-224 West Esplanade
North Vancouver, BC
V7M 1A4

Surrey Office:

15225 104th Avenue, Suite #410
Surrey, BC
V3R 6Y8

Latest News

  • Understanding Registered Education Savings Plans (RESPs) in CanadaSeptember 1, 2023 - 6:00 am
  • Retirement PlanningAugust 1, 2023 - 6:37 pm
  • Understanding Tax-Free Savings Accounts (TFSAs)July 4, 2023 - 6:48 pm
  • Demystifying MER’s (Management Expense Ratio)June 2, 2023 - 10:19 pm
  • First Home Savings Account (FHSA): What You Need to KnowMay 1, 2023 - 9:36 pm

About

ACA Financial is an independent financial advisory firm founded on the principle of client-focused advice. Our approach, listening and understanding our clients' unique needs. The result, a clear and mutual understanding and the foundation for all planning considerations. We are committed to demonstrating value by delivering on each client's need for growth, safety, liquidity and cash flow.

LIFE AND HEALTH INSURANCE PRODUCTS ARE PROVIDED BY ACA FINANCIAL. LIFE AND HEALTH INSURANCE PRODUCTS AND SERVICES ARE NOT AVAILABLE THROUGH DESJARDINS FINANCIAL SECURITY INVESTMENTS INC. (DFS INVESTMENTS) NOR ARE THE INSURANCE PLANS OR SERVICES AVAILABLE AND/OR OFFERED SUPERVISED OR REVIEWED BY DFS INVESTMENTS. DFS INVESTMENTS IS THE MUTUAL FUND DEALER THROUGH WHICH MUTUAL FUND PRODUCTS AND SERVICES ARE PROVIDED.

Our Dealer

Mutual funds are distributed through Desjardins Financial Security Investments Inc.

 
Disclaimer & Legal Information

©2017 Financial Tech Tools Inc. | Privacy Statement and Terms of Use
  • LinkedIn
RRSP Deadline is March 1, 2018. How much tax can you save? 2018 Federal Budget Highlights for Families
Scroll to top