604.626.6381 rdouglas@dtfs.ca
  • Instagram
  • RSS
  • Instagram
  • RSS
Douglas Total Financial Solutions
  • HOME
  • ABOUT
    • PARTNERS
    • ARE YOU READY TO RETIRE
  • SERVICES
    • INSURANCE PLANNING
      • BBD HEALTH INSURANCE
      • DISABILITY INSURANCE
      • CRITICAL ILLNESS INSURANCE
      • LIFE INSURANCE
      • MORTGAGE LIFE INSURANCE
      • BUY ONLINE
    • LIFE STAGES
      • STARTING YOUR CAREER
      • GROWING FAMILIES
      • MATURE FAMILIES
      • PREPARING FOR RETIREMENT
      • RETIREES
    • BUSINESS STAGES
      • BUSINESS SUCCESSION
      • BUSINESS CONTINUATION
      • EXECUTIVE BENEFITS
      • GROUP BENEFITS
    • BANKING
      • ALL-IN BANKING
      • ADVANTAGE ACCOUNT
  • RESOURCES
  • BLOG
  • CONTACT
Select Page

Comparing TFSAs and RRSPs

by Ryan Douglas | Feb 1, 2018 | 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.

Recent Posts

  • Understanding Target Loss Ratio and Your Group Benefits Plan
  • Insurance For Physicians – What Kinds Do You Need
  • Understanding Registered Education Savings Plans (RESPs) in Canada
  • Understanding Tax-Free Savings Accounts (TFSAs)
  • Different types of life insurance explained

Categories

  • 2019 Only
  • 2020
  • 2020 Only
  • 2021
  • 2022
  • 2022 Only
  • 2023
  • Accountants
  • Blog
  • Budget
  • Business Owners
  • Business Owners
  • Business Succession
  • buy sell
  • Capital dividend account
  • Charitable Gifting
  • Coronavirus
  • Coronavirus – Associates
  • Coronavirus – Practice Owners
  • Coronavirus – Retired
  • Coronavirus – Retiring
  • Coronavirus – Students
  • corporate
  • Critical Illness
  • Debt
  • dental benefits
  • disability
  • disability insurance
  • Education
  • Employees
  • Estate Planning
  • Executive Benefits
  • Families
  • Family
  • Finance
  • Financial
  • financial advice
  • Financial Planning
  • financial team
  • Group Benefits
  • health benefits
  • Home
  • Home Buyer's Plan
  • incorporated professionals
  • Individuals
  • Individuals and Families
  • Insurance
  • Investment
  • Key person
  • Life Insurance
  • long term care
  • mortgage
  • Mortgage Insurance
  • Non-Registered Investments
  • pension plan
  • personal finances
  • Professional Corporations
  • RDSP
  • Registered Education Savings Plan
  • Retirees
  • Retirement
  • Retirement Planning
  • RRSP
  • Savings
  • Segregated Funds
  • Shareholders
  • Sole Proprietor
  • Students
  • Tax
  • Tax Free Savings Account
  • Taxes
  • TFSA
  • travel insurance
  • Useful Links

Contact Us

Ryan Douglas, CFP®
Tel: (604) 626- 6381
Email: rdouglas@dtfs.ca
Fax: (866) 876-8975

Maple Ridge Office
10676 244th Street
Maple Ridge, BC
V2W 2E6

Serving British Columbia and Ontario.

Recent Articles

Understanding Target Loss Ratio and Your Group Benefits Plan

Unlock the mysteries of your group benefits plan! Discover how the target loss ratio (TLR) can influence your premiums and what it means for your company’s future. Dive in now!

Insurance For Physicians – What Kinds Do You Need

You’ve worked hard to become a physician and establish your practice. Now you want to make sure that you have the right kind of insurance to protect your income and share your wealth after you’re gone.

With the right kinds of insurance in place, you can:
• Protect your income stream.
• Be smart about tax planning and increase your wealth.
• Maximize your estate and leave a legacy.

Read our article “Insurance For Physicians – What Kinds Do You Need?” to learn more about how insurance can help you reach your goals.

Understanding Registered Education Savings Plans (RESPs) in Canada

Dive into the details of Registered Education Savings Plans (RESPs)! This guide covers how RESPs work, eligibility criteria, benefits, and government grants such as the Canada Education Savings Grant. Learn how to open an RESP and safeguard your child’s educational future.

Understanding Tax-Free Savings Accounts (TFSAs)

A Tax-Free Savings Account is a powerful tool to help you achieve your financial goals. Whether you’re saving for a new home, planning for retirement, or investing in your children’s education, a TFSA can be a valuable part of your financial strategy. The flexibility and tax advantages it offers make it a great choice for many Canadians.

Remember, the sooner you start, the more time your investments have to grow tax-free. Every dollar counts when you’re planning for the future, and a TFSA can help you make the most of your savings.

Don’t wait until tomorrow to start planning for your future. Contact us today to begin your journey to financial security today.

Different types of life insurance explained

Whether you already have life insurance or are looking to get some, it’s essential to be familiar with the four most common kinds of life insurance available. Getting the best type of life insurance for you ensures that you are getting the coverage you want while providing financial protection for you and your family. These are the four most common kinds of life insurance:
• Term life insurance
• Permanent life insurance
• Participating life insurance
• Universal life insurance

About Ryan Douglas, CFP®

We work with both individuals and companies in helping them achieve their financial goals. Our personal services include insurance and investment services, allowing you to get the best product for the best price for your specific situation. We also offer retirement, estate and financial plans and portfolio management.

Subscribe to our Newsletter

* indicates required

    © 2018 Financial Tech Tools | Privacy Statement and Website Terms of Use