RRSP or TFSA?

If you're like many Canadians, you're probably wondering what the Tax-Free Savings Account (TFSA) is all about. This product, introduced by the Government of Canada, was designed to help Canadians increase their savings without being taxed on the interest earned in that account.

So, what's the difference between a TFSA and an RRSP?

Both are savings vehicles. RRSPs are tax deductible at the time of contribution, whereas a TFSA is not. However, when you withdraw money from an RRSP it is taxable, where a TFSA is not. TFSAs can be used for other purposes besides retirement, so they offer additional flexibility, being able to access these savings at any time.

Deciding whether a TFSA or RRSP (or a combination of both) is right for you will depend largely on your need to access your funds, or whether you need the immediate tax deduction. Perhaps you expect to be in a higher tax bracket in the future and will need the tax-free benefits that a TFSA presents. Or maybe you've topped out on your RRSPs and would like another savings vehicle that doesn't get taxed when withdrawn. Cambrian can help you decide what the right solution is.