What is an RRSP? What is TFSA? For what?
In the past few years, this has become a common problem in January and February in Canada. Must invest in TFSA or RRSP. First, we must explain the difference between the two.
What is an RRSP?
Registered retirement savings programs help save for retirement and evade taxes… at least for now. The funds deposited in the RRSP will reduce the taxable income in the tax year. This year, the tax payment from March 2011 to February 2012 will effectively reduce the tax amount of last year’s income. RRSP can be tax-free(with interest) as long as it has money. When you take it out, you will pay taxes. I will explain in detail later.
The sooner you enroll in a retirement savings plan, the more capital you will have. The maximum donation limit this year is $22970, but many people do not use all their space every year, so they may have free space a few years ago. Use software such as TurboTax every year to track room limits and exceed unused space. Any Canadian resident under the age of 71 can start a family. Do you want to know how much you have contributed? The RRSP calculator is available on the websites of major banks, and the RRSP optimizer is available on Turbo Tax. You can choose the amount of investment to reduce taxes.
got it. What is TFSA?
As a savings account, tax-free savings account has a good turning point. The money you invest and any interest you earn are tax exempt. Unlike RRSP, there is no need to report money earned from them on income tax returns. Less restrictive than RRSP. Because you can withdraw money at any time, you will not be punished. The TFSA is capped at $5000 per annum. Anyone over the age of 18 can subscribe to TFSA.
So, which one is best for you?
although both can be invested, to choose one of them, please consider the current financial situation, look forward to the future, and predict the future.
As mentioned above, RRSP currently provides you with tax relief, and TFSA is exempt from tax when you withdraw money, including the interest you pay.
If you think you are at a lower tax level when you need funds in your future life, RRSP is now in favor of the wealthier ones. Because you will get more tax relief now and less tax burden in the future. On the other hand, if you want to make more money when you start withdrawing money, TFSA is a better choice. Because the taxes paid now are less, the richer people in the future will not pay higher taxes in the future.
