4 Corner Financial
  • HOME
  • ABOUT
    • ABOUT
    • HAPPY CLIENTS
    • CARRIERS
    • PRIVACY STATEMENT & WEBSITE TERMS OF USE
  • SERVICES
    • Mortgage Insurance
    • Retirement Planning
      • Tax Free Savings Account
      • Registered Retirement Savings Plan
      • Registered Retirement Income Fund
      • ANNUITIES
      • Segregated Funds vs. Mutual Funds
    • FINANCIAL ADVICE
    • BUSINESS OWNERS
      • FINANCIAL ADVICE FOR BUSINESS OWNERS
    • INSURANCE PLANNING
      • LIFE INSURANCE
      • CRITICAL ILLNESS INSURANCE
    • ONLINE SERVICES
      • TRAVELSTAR TRAVEL INSURANCE
      • TRAVEL INSURANCE
      • GMS HEALTH INSURANCE
      • FLEXCARE, ASSOCIATION, HEALTH AND DENTAL PLANS
      • GMS VISITOR TO CANADA PLANS
      • EMPIRE LIFE INSURANCE
  • RESOURCES
    • RESOURCES
    • CALCULATOR
  • NEWS
  • BOOK A MEETING
Select Page

Comparing TFSAs and RRSPs

by 4 Corner Financial | Jan 4, 2019 | Blog, Family, individuals, investment, retirees, RRSP, tax, Tax Free Savings Account

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.

RSS Subscribe via RSS

  • Saskatchewan 2023 Budget Highlights March 23, 2023
    On March 22, 2023, the Saskatchewan Minister of Finance announced Saskatchewan’s 2023 budget. We have highlighted the most important financial measures you need to know, with an emphasis on the following: • Corporate tax incentives. • Tax credits and PST changes. • Commitments to healthcare, education and social services. • Infrastructure spending.
    4 Corner Financial
  • Why A Buy-Sell Agreement Is Vital For Your Business March 2, 2023
    A buy-sell agreement is a legally binding document that sets out what must happen to a business if one or more of the owners is no longer involved. It is crucial for businesses as it protects both shareholders and the business itself in the event of a partner's departure. A buy-sell agreement provides many benefits, […]
    4 Corner Financial
  • TFSA versus RRSP – What you need to know to make the most of them in 2023 February 2, 2023
    When looking to save money in a tax-efficient manner, Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP) can offer significant tax benefits. The main difference between the two is that TFSAs are ideal for short-term goals, such as saving for a down payment on a house or a vacation, as its growth is […]
    4 Corner Financial
  • Canada Pension Plan and Old Age Security Changes January 5, 2023
    The Canada Pension Plan (CPP) and Old Age Security have recently undergone changes that may affect when individuals begin drawing on these programs. Read more here
    4 Corner Financial
  • 2023 Financial Calendar January 1, 2023
    Welcome to our 2023 financial calendar! This calendar is designed to help you keep track of important financial dates and deadlines, such as tax filing and government benefit distribution. You can bookmark this page for easy reference or add these dates to your personal calendar to ensure you don't miss any important financial obligations.
    4 Corner Financial

Latest posts

  • Saskatchewan 2023 Budget Highlights

    Saskatchewan 2023 Budget Highlights

    March 23, 2023
  • Why A Buy-Sell Agreement Is Vital For Your Business

    Why A Buy-Sell Agreement Is Vital For Your Business

    March 2, 2023
  • TFSA versus RRSP – What you need to know to make the most of them in 2023

    TFSA versus RRSP – What you need to know to make the most of them in 2023

    February 2, 2023
  • Canada Pension Plan and Old Age Security Changes

    Canada Pension Plan and Old Age Security Changes

    January 5, 2023
  • 2023 Financial Calendar

    2023 Financial Calendar

    January 1, 2023

Categories

  • 2019 Only
  • 2020
  • 2020 Only
  • 2021
  • 2022
  • 2022 Only
  • 2023
  • Accountants
  • Blog
  • 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
  • estate planning
  • Families
  • Family
  • financial advice
  • Financial Planning
  • group benefits
  • health benefits
  • incorporated professionals
  • individuals
  • insurance
  • investment
  • Investments
  • life insurance
  • mortgage
  • pension plan
  • permanent insurance
  • personal finances
  • Professional Corporations
  • RDSP
  • Registered Education Savings Plan
  • retirees
  • Retirement
  • RRSP
  • Savings
  • tax
  • Tax Free Savings Account
  • term insurance
  • travel insurance
  • Uncategorized

James A. Dietrich, FIC, AFA

(306) 931-7625

jamesd@4cornerfinancial.ca

Address

513 Baycroft Drive
Martensville, SK S0K 2T2

  • Follow
  • Follow

Success!

Subscribe Now

Cleantalk Pixel