RRSP vs TFSA: Where to Save?
RRSP ਬਨਾਮ TFSA: ਕਿੱਥੇ ਬਚਤ ਕਰਨੀ ਹੈ?
Comparing the tax benefits of Registered Retirement Savings Plans and Tax-Free Savings Accounts for business owners.
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Key Takeaways
- RRSP reduces taxable income now, taxed on withdrawal
- TFSA contributions are after-tax, but growth is tax-free forever
- RRSP is better if you're in a higher tax bracket now
- TFSA is better for flexibility and lower-income earners
RRSP vs TFSA Comparison
RRSP (Registered Retirement Savings Plan)
Contributions are tax-deductible. Investments grow tax-free. Withdrawals are taxed as income. Best for high earners expecting lower retirement income.
TFSA (Tax-Free Savings Account)
Contributions are after-tax. Investments grow tax-free. Withdrawals are completely tax-free. Best for flexibility and lower-income earners.
When to Choose RRSP
- You're in a high tax bracket (over $55,000 income)
- You expect lower income in retirement
- You want to reduce this year's tax bill
- Your employer offers RRSP matching
When to Choose TFSA
- You're in a lower tax bracket
- You may need the money before retirement
- You've maxed out your RRSP
- You want tax-free growth with no withdrawal restrictions
2025 Contribution Limits
TFSA: $7,000 per year. RRSP: 18% of previous year income (max $32,490).
Need Help Deciding?
Tax Punjabi can help you develop a savings strategy that fits your situation.