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Call 1 844-542-4678 to speak to our advisors.
Call 1 844-542-4678 to speak to our advisors.
Call 1 844-542-4678 to speak to our advisors.
RRSP | TFSA | |
---|---|---|
How do you start one? | Filed your income for the previous year and earned an income | If you are a Canadian resident and you’re 18 or older having a valid social insurance number |
How long can you contribute? | Dec. 31 of the year you turn seventy-one | For entire life |
What’s the contribution deadline? | March 1, 2021,is when you will claim a deduction for the previous year | N/A as contributions are not deductible |
What’s the contribution limit? | The smaller amount of 18% of your earned income last year or 2020’s annual limit of $27,230 plus any unused carry-forward | $6,000 for 2020, plus any withdrawals in a previous year and any unused contribution room carried forward from the previous year |
What happens if you withdraw money? | The contribution room is lost permanently | The contribution room is re-added on Jan. 1 of the following year |
What happens if you withdraw money? | The contribution room is lost permanently | The contribution room is re-added on Jan. 1 of the following year |
What are the upfront tax advantages? | Taxable income is low for the current year | None, because contributions are made with after-tax income |
What are the future tax advantages? | Income earned in your RRSP is tax-free as long as it stays in the plan. | Tax is not paid on any income earned in the account or the money you withdraw. |
What are the future tax advantages? | Every dollar withdrawn is taxed at a small tax rate.Tax rate is lower when you’re retired. | If you need to use your savings for short-term expenses or emergencies there are no tax implications. |
What are the future tax advantages? | - | Withdrawals aren’t considered income, so this money isn’t included when the government calculates benefits like Old Age Security, Guaranteed Income Supplements, GST/HST credits and other credits/benefits like the Age Credit. |
Conclusion | RRSP provide greater short and long-term tax benefits. It is less flexible because you have to pay tax on withdrawals. | Less tax benefits but is more flexible because there are no tax implications for withdrawals. |
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