{"id":1191,"date":"2021-03-03T20:07:00","date_gmt":"2021-03-03T20:07:00","guid":{"rendered":"http:\/\/planulife.com\/?post_type=articles&p=1191"},"modified":"2024-06-12T19:35:32","modified_gmt":"2024-06-12T19:35:32","slug":"rrsp-vs-tfsa-understanding-the-difference","status":"publish","type":"articles","link":"https:\/\/lifelonginvestments.ca\/fr\/articles\/rrsp-vs-tfsa-understanding-the-difference\/","title":{"rendered":"RRSP vs TFSA- Understanding the difference"},"content":{"rendered":"

One of the most common questions when it comes to saving long term is whether to invest in a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA). Both will help you save, and save on taxes, but each works in different ways. Understanding the difference between the two will help you know when to use one or the other, and when you can use both.<\/span><\/h3>\n

\u00a0<\/span><\/p>\n

What is a TFSA?<\/u><\/b><\/h2>\n

\"\"<\/p>\n

Introduced to Canadians in 2009, the (TFSA) <\/span>has become very popular. The gains you make from any investments and savings in the account are tax-free. It\u2019s a great incentive for saving, and for maximizing any earnings you may get. And since you paid tax on the money you put into your TFSA, you won\u2019t have to pay anything when you take money out.<\/span><\/h3>\n

TFSA also has very few withdrawal rules, You\u2019re free to withdraw at any time without penalty, but there are government-mandated limits to how much you can contribute every year.<\/span><\/h3>\n

\u00a0E<\/span>ach year since inception an additional contribution <\/span>limit<\/span> was provided (I.e.<\/span> of<\/span> $6,000 <\/span>in 2021) <\/span>available for your TFSA, which means that you can put that amount away, plus any rollover from previous years<\/span>.<\/span> If you were 18 years or older in 2009, your contribution limit in 2021 totals $75,500.<\/span><\/h3>\n

<\/h3>\n

<\/h2>\n

What is a RRSP?<\/u><\/b><\/h2>\n

\"\"<\/p>\n

A registered retirement savings plan, or (RRSP)<\/span>, is also a government-sponsored retirement plan with significant tax benefits. An RRSP is a tax-advantaged account that allows you to defer your taxes while saving for retirement.<\/span><\/h3>\n

Instead of your earnings being tax-free (such as with TFSA), any money you contribute to an RRSP will be exempt from income taxes the year you make the deposit<\/span>,<\/span> The main difference from the TFSA is that you <\/span>will<\/span><\/i> pay tax on this money once you withdraw it<\/span>. Also, you invest after-tax earnings into your TFSA, whereas you invest in an RRSP to reduce your taxes payable in the contribution year. <\/span>The logic is that, because you will be retired, you will be in a lower tax bracket than during your high-earning years, and thus will pay less tax overall because you invested in an RRSP.\u00a0<\/span><\/h3>\n

<\/h3>\n

<\/h2>\n

What is the difference?<\/u><\/b><\/h2>\n

The crucial difference between the (RRSP) and (TFSA) comes down to their contribution limits and withdrawal restrictions, as well as how and when you pay taxes on the money saved. Our chart below summarizes some of the pros and cons of (TFSA)s and (RRSP)s.<\/span><\/h3>\n

\n\n\n\n\t\n\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t
<\/td>TFSA<\/th>RRSP<\/th>\n<\/tr>\n<\/thead>\n
Flexibility<\/td>Can be withdrawn anytime and used for anything<\/td>Can't take out money penalty- free except for buying your first home or under the Lifelong learning Plan<\/td>\n<\/tr>\n
Investment Option<\/td>You can choose your own investments <\/td>You can choose your own investment <\/td>\n<\/tr>\n
Tax Rules<\/td>Tax- sheltered growth on investment <\/td>Tax- sheltered growth on investment <\/td>\n<\/tr>\n
Direct Contributions <\/td>Can contribute directly (up to $75,500 total as of 2021)<\/td>Can contribute directly (18% of previous year's earned income up to $27,830 for 2021)<\/td>\n<\/tr>\n
Tax Deduction<\/td>No tax deductions for contributions (Withdraw any amount at any time, without paying income tax)<\/td>You can claim a tax deduction in the year you make a contribution, or carry it forward to future years (withdraw any amount at anytime, subject to income tax)<\/td>\n<\/tr>\n
Withdrawal Rules<\/td>When you cash out, it's tax free (Can only replace the amount of the withdrawal in the same year if you have avaible TFSA contribution room)<\/td>When you cash out, you have to pay income tax<\/td>\n<\/tr>\n
Contribution Limits<\/td>Annual maximum: Varies year to year. Max 6,000 for 2021 (Lifetime maximum: as of 2021, $75,500 total for those who were 18 in 2009)<\/td>Annual maximum: 18% of previous year's earned income up to $27,830 (whichever is lower)<\/td>\n<\/tr>\n
Expiration<\/td>No expiry <\/td>RRSP must be converted to a Registered Retirement Income Fund (RRIF) by Dec 31 of the year you turn 71<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/h3>\n

 <\/p>\n

<\/h2>\n

Which one is better for you?<\/u><\/b><\/h2>\n

Your income determines your tax bracket (the amount of income tax you have to pay) and these factors will strongly influence which investments work best for you. As a simple rule of thumb:<\/span><\/h3>\n
    \n
  • \n

    RRSP if you make over $50,000<\/span><\/h3>\n<\/li>\n
  • \n

    TFSA if you make under $50,000<\/span><\/h3>\n<\/li>\n<\/ul>\n

    <\/h2>\n

    <\/h2>\n

    What do I do next?<\/u><\/b><\/h2>\n

    At Lifelong Investments, <\/span>we have experienced A<\/span>dvisors that c<\/span>an<\/span> help with all your RRSP<\/span>\u00a0and <\/span>TFSA requirements. Call <\/span>us <\/span>today <\/span>at<\/span> 1<\/span>(<\/span>855<\/span>)<\/span>-600-9020<\/span><\/h3>","protected":false},"excerpt":{"rendered":"

    One of the most common questions when it comes to saving long term is whether to invest in a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA). Both will help you save, and save on taxes, but each works in different ways. Understanding the difference between the two will help you know […]<\/p>\n","protected":false},"author":2,"featured_media":1203,"comment_status":"open","ping_status":"closed","template":"","meta":{"footnotes":""},"class_list":["post-1191","articles","type-articles","status-publish","has-post-thumbnail","hentry","article_categories-investment"],"yoast_head":"\nRRSP vs TFSA- Understanding the difference - Lifelong Investments<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/lifelonginvestments.ca\/fr\/articles\/rrsp-vs-tfsa-understanding-the-difference\/\" \/>\n<meta property=\"og:locale\" content=\"fr_FR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"RRSP vs TFSA- Understanding the difference - Lifelong Investments\" \/>\n<meta property=\"og:description\" content=\"One of the most common questions when it comes to saving long term is whether to invest in a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA). Both will help you save, and save on taxes, but each works in different ways. Understanding the difference between the two will help you know […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/lifelonginvestments.ca\/fr\/articles\/rrsp-vs-tfsa-understanding-the-difference\/\" \/>\n<meta property=\"og:site_name\" content=\"Lifelong Investments\" \/>\n<meta property=\"article:modified_time\" content=\"2024-06-12T19:35:32+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png\" \/>\n\t<meta property=\"og:image:width\" content=\"940\" \/>\n\t<meta property=\"og:image:height\" content=\"488\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Dur\u00e9e de lecture estim\u00e9e\" \/>\n\t<meta name=\"twitter:data1\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/\",\"url\":\"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/\",\"name\":\"RRSP vs TFSA- Understanding the difference - Lifelong Investments\",\"isPartOf\":{\"@id\":\"https:\/\/44.203.130.166\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png\",\"datePublished\":\"2021-03-03T20:07:00+00:00\",\"dateModified\":\"2024-06-12T19:35:32+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#breadcrumb\"},\"inLanguage\":\"fr-FR\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"fr-FR\",\"@id\":\"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#primaryimage\",\"url\":\"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png\",\"contentUrl\":\"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png\",\"width\":940,\"height\":488},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/44.203.130.166\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Articles\",\"item\":\"https:\/\/lifelonginvestments.ca\/articles\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"RRSP vs TFSA- Understanding the difference\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/44.203.130.166\/#website\",\"url\":\"https:\/\/44.203.130.166\/\",\"name\":\"Lifelong Investments\",\"description\":\"We provide Investments and Financial Planning options powered by Artificial Intelligence technology\",\"publisher\":{\"@id\":\"https:\/\/44.203.130.166\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/44.203.130.166\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"fr-FR\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/44.203.130.166\/#organization\",\"name\":\"Lifelong Investments\",\"url\":\"https:\/\/44.203.130.166\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"fr-FR\",\"@id\":\"https:\/\/44.203.130.166\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2025\/01\/new-logo.png\",\"contentUrl\":\"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2025\/01\/new-logo.png\",\"width\":387,\"height\":68,\"caption\":\"Lifelong Investments\"},\"image\":{\"@id\":\"https:\/\/44.203.130.166\/#\/schema\/logo\/image\/\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"RRSP vs TFSA- Understanding the difference - Lifelong Investments","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/lifelonginvestments.ca\/fr\/articles\/rrsp-vs-tfsa-understanding-the-difference\/","og_locale":"fr_FR","og_type":"article","og_title":"RRSP vs TFSA- Understanding the difference - Lifelong Investments","og_description":"One of the most common questions when it comes to saving long term is whether to invest in a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA). Both will help you save, and save on taxes, but each works in different ways. Understanding the difference between the two will help you know […]","og_url":"https:\/\/lifelonginvestments.ca\/fr\/articles\/rrsp-vs-tfsa-understanding-the-difference\/","og_site_name":"Lifelong Investments","article_modified_time":"2024-06-12T19:35:32+00:00","og_image":[{"width":940,"height":488,"url":"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png","type":"image\/png"}],"twitter_card":"summary_large_image","twitter_misc":{"Dur\u00e9e de lecture estim\u00e9e":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/","url":"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/","name":"RRSP vs TFSA- Understanding the difference - Lifelong Investments","isPartOf":{"@id":"https:\/\/44.203.130.166\/#website"},"primaryImageOfPage":{"@id":"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#primaryimage"},"image":{"@id":"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#primaryimage"},"thumbnailUrl":"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png","datePublished":"2021-03-03T20:07:00+00:00","dateModified":"2024-06-12T19:35:32+00:00","breadcrumb":{"@id":"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#breadcrumb"},"inLanguage":"fr-FR","potentialAction":[{"@type":"ReadAction","target":["https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/"]}]},{"@type":"ImageObject","inLanguage":"fr-FR","@id":"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#primaryimage","url":"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png","contentUrl":"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png","width":940,"height":488},{"@type":"BreadcrumbList","@id":"https:\/\/lifelonginvestments.ca\/articles\/rrsp-vs-tfsa-understanding-the-difference\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/44.203.130.166\/"},{"@type":"ListItem","position":2,"name":"Articles","item":"https:\/\/lifelonginvestments.ca\/articles\/"},{"@type":"ListItem","position":3,"name":"RRSP vs TFSA- Understanding the difference"}]},{"@type":"WebSite","@id":"https:\/\/44.203.130.166\/#website","url":"https:\/\/44.203.130.166\/","name":"Lifelong Investments","description":"We provide Investments and Financial Planning options powered by Artificial Intelligence technology","publisher":{"@id":"https:\/\/44.203.130.166\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/44.203.130.166\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"fr-FR"},{"@type":"Organization","@id":"https:\/\/44.203.130.166\/#organization","name":"Lifelong Investments","url":"https:\/\/44.203.130.166\/","logo":{"@type":"ImageObject","inLanguage":"fr-FR","@id":"https:\/\/44.203.130.166\/#\/schema\/logo\/image\/","url":"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2025\/01\/new-logo.png","contentUrl":"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2025\/01\/new-logo.png","width":387,"height":68,"caption":"Lifelong Investments"},"image":{"@id":"https:\/\/44.203.130.166\/#\/schema\/logo\/image\/"}}]}},"fimg_url":"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Copy-of-Copy-of-Beige-Photo-Grid-Family_Personal-Facebook-Post-1.png","_content":{"raw":"<h3><span style=\"font-weight: 400;\">One of the most common questions when it comes to saving long term is whether to invest in a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA). Both will help you save, and save on taxes, but each works in different ways. Understanding the difference between the two will help you know when to use one or the other, and when you can use both.<\/span><\/h3>\r\n<span style=\"font-weight: 400;\">\u00a0<\/span>\r\n<h2><b><u>What is a TFSA?<\/u><\/b><\/h2>\r\n<img class=\"alignnone size-medium wp-image-1217\" src=\"http:\/\/planulife.com\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-4-300x167.png\" alt=\"\" width=\"300\" height=\"167\" \/>\r\n<h3><span style=\"font-weight: 400;\">Introduced to Canadians in 2009, the (TFSA) <\/span><span style=\"font-weight: 400;\">has become very popular. The gains you make from any investments and savings in the account are tax-free. It\u2019s a great incentive for saving, and for maximizing any earnings you may get. And since you paid tax on the money you put into your TFSA, you won\u2019t have to pay anything when you take money out.<\/span><\/h3>\r\n<h3><span style=\"font-weight: 400;\">TFSA also has very few withdrawal rules, You\u2019re free to withdraw at any time without penalty, but there are government-mandated limits to how much you can contribute every year.<\/span><\/h3>\r\n<h3><span style=\"font-weight: 400;\">\u00a0E<\/span><span style=\"font-weight: 400;\">ach year since inception an additional contribution <\/span><span style=\"font-weight: 400;\">limit<\/span><span style=\"font-weight: 400;\"> was provided (I.e.<\/span><span style=\"font-weight: 400;\"> of<\/span><span style=\"font-weight: 400;\"> $6,000 <\/span><span style=\"font-weight: 400;\">in 2021) <\/span><span style=\"font-weight: 400;\">available for your TFSA, which means that you can put that amount away, plus any rollover from previous years<\/span><span style=\"font-weight: 400;\">.<\/span><span style=\"font-weight: 400;\"> If you were 18 years or older in 2009, your contribution limit in 2021 totals $75,500.<\/span><\/h3>\r\n<h3><\/h3>\r\n<h2><\/h2>\r\n<h2><b><u>What is a RRSP?<\/u><\/b><\/h2>\r\n<img class=\"alignnone size-medium wp-image-1215\" src=\"http:\/\/planulife.com\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-3-300x167.png\" alt=\"\" width=\"300\" height=\"167\" \/>\r\n<h3><span style=\"font-weight: 400;\">A registered retirement savings plan, or (RRSP)<\/span><span style=\"font-weight: 400;\">, is also a government-sponsored retirement plan with significant tax benefits. An RRSP is a tax-advantaged account that allows you to defer your taxes while saving for retirement.<\/span><\/h3>\r\n<h3><span style=\"font-weight: 400;\">Instead of your earnings being tax-free (such as with TFSA), any money you contribute to an RRSP will be exempt from income taxes the year you make the deposit<\/span><span style=\"font-weight: 400;\">,<\/span><span style=\"font-weight: 400;\"> The main difference from the TFSA is that you <\/span><i><span style=\"font-weight: 400;\">will<\/span><\/i><span style=\"font-weight: 400;\"> pay tax on this money once you withdraw it<\/span><span style=\"font-weight: 400;\">. Also, you invest after-tax earnings into your TFSA, whereas you invest in an RRSP to reduce your taxes payable in the contribution year. <\/span><span style=\"font-weight: 400;\">The logic is that, because you will be retired, you will be in a lower tax bracket than during your high-earning years, and thus will pay less tax overall because you invested in an RRSP.\u00a0<\/span><\/h3>\r\n<h3><\/h3>\r\n<h2><\/h2>\r\n<h2><b><u>What is the difference?<\/u><\/b><\/h2>\r\n<h3><span style=\"font-weight: 400;\">The crucial difference between the (RRSP) and (TFSA) comes down to their contribution limits and withdrawal restrictions, as well as how and when you pay taxes on the money saved. Our chart below summarizes some of the pros and cons of (TFSA)s and (RRSP)s.<\/span><\/h3>\r\n<h3>[table id=2 responsive=\"scroll\" \/]<\/h3>\r\n \r\n<h2><\/h2>\r\n<h2><b><u>Which one is better for you?<\/u><\/b><\/h2>\r\n<h3><span style=\"font-weight: 400;\">Your income determines your tax bracket (the amount of income tax you have to pay) and these factors will strongly influence which investments work best for you. As a simple rule of thumb:<\/span><\/h3>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">\r\n<h3><span style=\"font-weight: 400;\">RRSP if you make over $50,000<\/span><\/h3>\r\n<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">\r\n<h3><span style=\"font-weight: 400;\">TFSA if you make under $50,000<\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<h2><\/h2>\r\n<h2><\/h2>\r\n<h2><b><u>What do I do next?<\/u><\/b><\/h2>\r\n<h3><span style=\"font-weight: 400;\">At Lifelong Investments, <\/span><span style=\"font-weight: 400;\">we have experienced A<\/span><span style=\"font-weight: 400;\">dvisors that c<\/span><span style=\"font-weight: 400;\">an<\/span><span style=\"font-weight: 400;\"> help with all your RRSP<\/span><span style=\"font-weight: 400;\">\u00a0and <\/span><span style=\"font-weight: 400;\">TFSA requirements. Call <\/span><span style=\"font-weight: 400;\">us <\/span><span style=\"font-weight: 400;\">today <\/span><span style=\"font-weight: 400;\">at<\/span><span style=\"font-weight: 400;\"> 1<\/span><span style=\"font-weight: 400;\">(<\/span><span style=\"font-weight: 400;\">855<\/span><span style=\"font-weight: 400;\">)<\/span><span style=\"font-weight: 400;\">-600-9020<\/span><\/h3>","rendered":"<h3><span style=\"font-weight: 400;\">One of the most common questions when it comes to saving long term is whether to invest in a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA). Both will help you save, and save on taxes, but each works in different ways. Understanding the difference between the two will help you know when to use one or the other, and when you can use both.<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<h2><b><u>What is a TFSA?<\/u><\/b><\/h2>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-medium wp-image-1217\" src=\"http:\/\/planulife.com\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-4-300x167.png\" alt=\"\" width=\"300\" height=\"167\" srcset=\"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-4-300x167.png 300w, https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-4-1024x569.png 1024w, https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-4-768x427.png 768w, https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-4.png 1080w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/p>\n<h3><span style=\"font-weight: 400;\">Introduced to Canadians in 2009, the (TFSA) <\/span><span style=\"font-weight: 400;\">has become very popular. The gains you make from any investments and savings in the account are tax-free. It\u2019s a great incentive for saving, and for maximizing any earnings you may get. And since you paid tax on the money you put into your TFSA, you won\u2019t have to pay anything when you take money out.<\/span><\/h3>\n<h3><span style=\"font-weight: 400;\">TFSA also has very few withdrawal rules, You\u2019re free to withdraw at any time without penalty, but there are government-mandated limits to how much you can contribute every year.<\/span><\/h3>\n<h3><span style=\"font-weight: 400;\">\u00a0E<\/span><span style=\"font-weight: 400;\">ach year since inception an additional contribution <\/span><span style=\"font-weight: 400;\">limit<\/span><span style=\"font-weight: 400;\"> was provided (I.e.<\/span><span style=\"font-weight: 400;\"> of<\/span><span style=\"font-weight: 400;\"> $6,000 <\/span><span style=\"font-weight: 400;\">in 2021) <\/span><span style=\"font-weight: 400;\">available for your TFSA, which means that you can put that amount away, plus any rollover from previous years<\/span><span style=\"font-weight: 400;\">.<\/span><span style=\"font-weight: 400;\"> If you were 18 years or older in 2009, your contribution limit in 2021 totals $75,500.<\/span><\/h3>\n<h3><\/h3>\n<h2><\/h2>\n<h2><b><u>What is a RRSP?<\/u><\/b><\/h2>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1215\" src=\"http:\/\/planulife.com\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-3-300x167.png\" alt=\"\" width=\"300\" height=\"167\" srcset=\"https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-3-300x167.png 300w, https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-3-1024x569.png 1024w, https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-3-768x427.png 768w, https:\/\/lifelonginvestments.ca\/wp-content\/uploads\/2021\/03\/Copy-of-Untitled-3.png 1080w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/p>\n<h3><span style=\"font-weight: 400;\">A registered retirement savings plan, or (RRSP)<\/span><span style=\"font-weight: 400;\">, is also a government-sponsored retirement plan with significant tax benefits. An RRSP is a tax-advantaged account that allows you to defer your taxes while saving for retirement.<\/span><\/h3>\n<h3><span style=\"font-weight: 400;\">Instead of your earnings being tax-free (such as with TFSA), any money you contribute to an RRSP will be exempt from income taxes the year you make the deposit<\/span><span style=\"font-weight: 400;\">,<\/span><span style=\"font-weight: 400;\"> The main difference from the TFSA is that you <\/span><i><span style=\"font-weight: 400;\">will<\/span><\/i><span style=\"font-weight: 400;\"> pay tax on this money once you withdraw it<\/span><span style=\"font-weight: 400;\">. Also, you invest after-tax earnings into your TFSA, whereas you invest in an RRSP to reduce your taxes payable in the contribution year. <\/span><span style=\"font-weight: 400;\">The logic is that, because you will be retired, you will be in a lower tax bracket than during your high-earning years, and thus will pay less tax overall because you invested in an RRSP.\u00a0<\/span><\/h3>\n<h3><\/h3>\n<h2><\/h2>\n<h2><b><u>What is the difference?<\/u><\/b><\/h2>\n<h3><span style=\"font-weight: 400;\">The crucial difference between the (RRSP) and (TFSA) comes down to their contribution limits and withdrawal restrictions, as well as how and when you pay taxes on the money saved. Our chart below summarizes some of the pros and cons of (TFSA)s and (RRSP)s.<\/span><\/h3>\n<h3>\n<table id=\"tablepress-2\" class=\"tablepress tablepress-id-2\">\n<thead>\n<tr class=\"row-1\">\n\t<td class=\"column-1\"><\/td><th class=\"column-2\">TFSA<\/th><th class=\"column-3\">RRSP<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr class=\"row-2\">\n\t<td class=\"column-1\">Flexibility<\/td><td class=\"column-2\">Can be withdrawn anytime and used for anything<\/td><td class=\"column-3\">Can't take out money penalty- free except for buying your first home or under the Lifelong learning Plan<\/td>\n<\/tr>\n<tr class=\"row-3\">\n\t<td class=\"column-1\">Investment Option<\/td><td class=\"column-2\">You can choose your own investments <\/td><td class=\"column-3\">You can choose your own investment <\/td>\n<\/tr>\n<tr class=\"row-4\">\n\t<td class=\"column-1\">Tax Rules<\/td><td class=\"column-2\">Tax- sheltered growth on investment <\/td><td class=\"column-3\">Tax- sheltered growth on investment <\/td>\n<\/tr>\n<tr class=\"row-5\">\n\t<td class=\"column-1\">Direct Contributions <\/td><td class=\"column-2\">Can contribute directly (up to $75,500 total as of 2021)<\/td><td class=\"column-3\">Can contribute directly (18% of previous year's earned income up to $27,830 for 2021)<\/td>\n<\/tr>\n<tr class=\"row-6\">\n\t<td class=\"column-1\">Tax Deduction<\/td><td class=\"column-2\">No tax deductions for contributions (Withdraw any amount at any time, without paying income tax)<\/td><td class=\"column-3\">You can claim a tax deduction in the year you make a contribution, or carry it forward to future years (withdraw any amount at anytime, subject to income tax)<\/td>\n<\/tr>\n<tr class=\"row-7\">\n\t<td class=\"column-1\">Withdrawal Rules<\/td><td class=\"column-2\">When you cash out, it's tax free (Can only replace the amount of the withdrawal in the same year if you have avaible TFSA contribution room)<\/td><td class=\"column-3\">When you cash out, you have to pay income tax<\/td>\n<\/tr>\n<tr class=\"row-8\">\n\t<td class=\"column-1\">Contribution Limits<\/td><td class=\"column-2\">Annual maximum: Varies year to year. Max 6,000 for 2021 (Lifetime maximum: as of 2021, $75,500 total for those who were 18 in 2009)<\/td><td class=\"column-3\">Annual maximum: 18% of previous year's earned income up to $27,830 (whichever is lower)<\/td>\n<\/tr>\n<tr class=\"row-9\">\n\t<td class=\"column-1\">Expiration<\/td><td class=\"column-2\">No expiry <\/td><td class=\"column-3\">RRSP must be converted to a Registered Retirement Income Fund (RRIF) by Dec 31 of the year you turn 71<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<!-- #tablepress-2 from cache --><\/h3>\n<p> <\/p>\n<h2><\/h2>\n<h2><b><u>Which one is better for you?<\/u><\/b><\/h2>\n<h3><span style=\"font-weight: 400;\">Your income determines your tax bracket (the amount of income tax you have to pay) and these factors will strongly influence which investments work best for you. As a simple rule of thumb:<\/span><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h3><span style=\"font-weight: 400;\">RRSP if you make over $50,000<\/span><\/h3>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h3><span style=\"font-weight: 400;\">TFSA if you make under $50,000<\/span><\/h3>\n<\/li>\n<\/ul>\n<h2><\/h2>\n<h2><\/h2>\n<h2><b><u>What do I do next?<\/u><\/b><\/h2>\n<h3><span style=\"font-weight: 400;\">At Lifelong Investments, <\/span><span style=\"font-weight: 400;\">we have experienced A<\/span><span style=\"font-weight: 400;\">dvisors that c<\/span><span style=\"font-weight: 400;\">an<\/span><span style=\"font-weight: 400;\"> help with all your RRSP<\/span><span style=\"font-weight: 400;\">\u00a0and <\/span><span style=\"font-weight: 400;\">TFSA requirements. Call <\/span><span style=\"font-weight: 400;\">us <\/span><span style=\"font-weight: 400;\">today <\/span><span style=\"font-weight: 400;\">at<\/span><span style=\"font-weight: 400;\"> 1<\/span><span style=\"font-weight: 400;\">(<\/span><span style=\"font-weight: 400;\">855<\/span><span style=\"font-weight: 400;\">)<\/span><span style=\"font-weight: 400;\">-600-9020<\/span><\/h3>\n","protected":false,"block_version":0},"categories":[{"term_id":9,"name":"Investment","slug":"investment","term_group":0,"term_taxonomy_id":9,"taxonomy":"article_categories","description":"","parent":0,"count":4,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/articles\/1191","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/articles"}],"about":[{"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/types\/articles"}],"author":[{"embeddable":true,"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/comments?post=1191"}],"version-history":[{"count":17,"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/articles\/1191\/revisions"}],"predecessor-version":[{"id":2222,"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/articles\/1191\/revisions\/2222"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/media\/1203"}],"wp:attachment":[{"href":"https:\/\/lifelonginvestments.ca\/fr\/wp-json\/wp\/v2\/media?parent=1191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}