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RRSP or TFSA? Do you have to choose?

RRSP or TFSA? Do you have to choose?

Of all the investment options available, two are better known—and more popular—than the others. Can you guess which ones? They’re the RRSP (Registered Retirement Savings Plan) and the TFSA (Tax-Free Savings Account).

Though the RRSP and the TFSA are different products, they share some characteristics: both are registered, have annual contribution limits, and belong to a specific person, with designated beneficiaries. Since they’re also unique in their own ways, both can help reach different financial goals. Let’s take a closer look.


The RRSP is used to save money for retirement. Every year, your contributions decrease your taxable income on your tax return. Strategically speaking, the RRSP allows for greater tax savings when you contribute money than when you withdraw it at retirement. The RRSP is beneficial as long as your retirement income is lower than your income when you made your contributions.

With an RRSP, you postpone (but don’t avoid) paying taxes on this amount. Every year, you can contribute the equivalent of 18% of your annual income reported on your tax return in the previous year, up to a maximum of $29,210 (for 2022). Over time, these amounts accumulate, so any leftover contribution room is carried over from one year to the next on your contribution statement. Some programs let you use your RRSP for more than retirement. For example, to buy a first home, an RRSP holder could access $35,000 of their RRSP, tax-free, on the condition that they pay back the amount withdrawn in the next 15 years. For a return to school, this amount could reach $20,000, tax-free, on the condition that it is returned to the RRSP within the next 10 years.


The TFSA, for its part, is used to save on the short or long term. A TFSA lets you set money aside and protects the growth (interest, dividends, capital gains) of your savings from taxes. You cannot deduce your contributions from your tax return, but you will not be taxed if you withdraw money.

A TFSA is perfect for setting money aside on a regular and automatic basis. This type of savings account may serve as an emergency fund, carry out any short-term project, or accumulate long-term funds for retirement. When you withdraw money, you won’t have to pay taxes.

Do not hesitate to contact our advisory team to discuss these investment options or the various contribution options.


Jean Leblanc
Manager, Personal Lending & Wealth Management
Sturgeon Falls branch

Human. Available. Connected.

Mutual funds are offered through Credential Asset Management Inc.

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