Deciding Between an RRSP and a TFSA
Investing in a tax-smart account is one of the best ways to grow your money faster. Both Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) offer unique benefits, so how do you choose if you can’t contribute to both?
Here's a Quick Overview of Each:
RRSP
- Save for retirement while reducing your income taxes
- Defer the taxes on your investment income and pay only when you withdraw the money
- Borrow from yourself to buy your first home1 or pay for your or your spouse’s education2
- Hold a variety of investment products, such as GICs, mutual funds and savings deposits
TFSA
- Save for anything — a car, retirement, vacation and more, without income or age limits
- Access your savings on short notice
- Pay no taxes on the money you withdraw or on investment income earned
- Hold a variety of investment products, such as GICs, mutual funds and savings deposits
Tips to Help You Save More
Tips to Help You Save More
Save without even thinking about it
Set up a regular, automatic savings plan for your RRSP and/or TFSA. It’s the easy way to save and will increase your opportunity for returns.
Invest early in the year
The earlier in the year you invest in an RRSP or TFSA, the sooner your money can start growing.
I’m Ready to Invest
Choose the type of account you want to open—or call 1-800-463-38631-800-463-3863 if you still aren’t sure.
Financial planning services and investment advice are provided by Royal Mutual Funds Inc. (RMFI). RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.
1)
You can withdraw up to $25,000 from your RRSP to buy your first home under the Home Buyers’ Plan. The funds must have been on deposit at least 90 days before you withdrew them, and a signed agreement to buy or build a qualifying home is required. At least 1/15 of the funds must be repaid each year, beginning two years after the funds were withdrawn. For details see Canada Revenue Agency Home Buyers’ Plan.
2)
Under the Lifelong Learning Plan, you can withdraw up to $10,000 per calendar year for your own or your spouse's full–time training or post–secondary education. The total amount that can be withdrawn is $20,000 each with withdrawals over a maximum of four consecutive years. At least 10% of the amount borrowed must be repaid each year, over a maximum period of 10 years.