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Posted on May 17, 2020 in Personal Finance


TFSA - Tax Free Savings Plan

RRSP - Registered Retirement Savings Plan

Regardless of what the names say both TFSA and RRSP is for retirement planning. Considered them as buckets, You can store variety of instruments in them ranging from simple Savings Account , GICs, ETFs, Bonds and Mutual funds.

Let’s see how RRSP and TFSA differ


  1. You put your after-tax money into it.
  2. You will not get any tax refunds when you invest
  3. You can invest max of $6000 per year
  4. Unused contribution is carried over to next year
  5. Your investments grow tax free in it
  6. No tax on withdrawal
  7. If you withdraw, You will get contribution limit back next year.
  8. On Death, Your money pass on to your spouse TFSA or pass on tax free to your kids.


  1. Money you invest in it will be exempted from tax until it’s withdrawn again
  2. You can invest upto 18% of your last year’s earned income
  3. Money you invest will be reduced from your income for that year. Money you withdraw from RRSP will be added to income for that year.
  4. If you withdraw money, You will pay additional tax and lose that contribution room permanently unless you do for first time HBP or Lifelong Learning Plan.
  5. Unused contribution is carried over to next year
  6. If you make $75K and you contributed $10K to RRSP, Your income for that year will be considered as $65K
  7. On Death, Money pass on to your spouse RRSP or pass on after tax deduction to your kids

When you should Invest in RRSP

  1. Your employer matches you contribution to RRSP
  2. You think your pay will decrease or stay almost the same in the coming years
  3. You already invested max possible amount in TFSA
  4. You think you should shield your money from creditors

When you should not invest in TFSA

  1. You are planning to do Day trading in TFSA
  2. You have high interest debt like credit card and Personal loan

In the long run, It is better to invest maximum possible amount to your TFSA before contributing to RRSP.

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