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RRSPs RRIFs and TFSAs -> Tax-free savings accounts (TFSAs) -> TFSA vs RRSP

What is Better - TFSA or RRSP?

The RRSP and TFSA have almost equivalent results when the marginal rate for RRSP contributions is the same as for RRSP withdrawals.

bullet the marginal tax rate for RRSP withdrawals will be lower than the marginal tax rate when contributions are made
bullet you are saving for emergencies

The TFSA is better if

bulletyou are in the lowest tax bracket
bullet the marginal rate for RRSP withdrawals will be higher than the marginal rate for contributions
bullet you are close to retirement age, and have little or no savings or pension.  RRSP/RRIF withdrawals may cause loss of Guaranteed Income Supplement (GIS) or other benefits.
bullet further RRSP contributions will result in withdrawals which are high enough to cause a clawback of your Old Age Security.

The TFSA will be useful in some situations such as:

bullet when there is no RRSP contribution room available
bullet for savings goals such as a vehicle, appliances, down payment for a house, etc.  The TFSA could be used instead of, or in combination with, the RRSP Home Buyer's Plan (HBP).
bullet seniors who are not eligible, because of age, to contribute to an RRSP
bullet young people just starting out, in a low tax bracket now, expecting to increase earnings and be in a higher tax bracket in a few years.  At that time, the TFSAs could  be transferred to an RRSP, making the contribution when the tax savings is greater.  Make the transfer near the end of a calendar year, so that the withdrawal increases your TFSA contribution room sooner.

Use our TFSA vs RRSP Calculator to help you decide which type of account is better for you.

Tax Tip:  If you're in the lowest tax bracket, use TFSAs first.  The lowest tax bracket goes up to taxable income of just under $40,000.


bullet TFSA Contribution Rules and Limits
bullet Don't Over contribute!
bullet Unused Contribution Room
bullet TFSA Investments - qualified, non-qualified, and prohibited
bullet TFSA Withdrawals
bullet Asset Transfer (Swap) Transactions
bullet Taxes Payable re TFSA
bullet Marital Breakdown
bullet Death of the TFSA Holder

Back to TFSA main page.


Revised: August 26, 2015



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