Still not sure about RRSP vs. TFSA? Here’s how to use both

Feb 19 20:02 2020 Print This Article

Learn how to maximize long-term tax benefits using tax-sheltered or tax-deferred registered plans.

 

One of the biggest benefits of registered plans in Canada is the tax-deferral opportunity on the compound growth inside the plans. In other words, registered plans generally allow investors to avoid the periodic tax on investment income generated; non-registered plans, in contrast, expose investors to annual taxation of income distributions. Without the annual “tax-drag,” investments in registered plans can grow faster than investments in non-registered plans. Given that, which registered plan is best to use? Here are key factors to consider when deciding whether to invest in a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA).

 

RRSP contributions are deductible against income, and RRSP redemptions are 100% taxable as income. TFSA contributions are made with after-tax money, and TFSA withdrawals are tax-free. Funds grow inside both plans on a tax-deferred basis.

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Trimark Investments Blog

As one of Canada’s leading investment management companies, Trimark Investments is singularly focused on putting investors' interests first. Invesco Canada offers a diversified suite of investment solutions to investors across the country and around the world. The blog is comprised of portfolio managers, who are often asked about their views on various investment-, market- and economy-related topics and how these views impact investment decisions. Trimark Investment blog intends to answer the questions Invesco Canada is frequently asked.

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