RRSP or TFSA: What's Better for You as Tax Season Approaches?

Statera Financial Planners |

People often find it difficult to manage finances, but RRSPs and TFSAs remain common and tax advantageous savings options for Canadians!



There’s no right or wrong answer, they’re both smart savings vehicles for different reasons, but it depends on your age, your needs, the stage of your career and your income level and tax bracket. They have different benefits.

The bottom line is it’s never too early or too late to start your tax-advantaged saving program. Whether it’s an RRSP, a TFSA or both, they are important and easy ways to help you work towards achieving your financial goals. The key is to get started, maximizing what you save and reducing what you spend. Statera Financial Planners can help you assess which one makes more sense for you and your household given your taxable income.



The usual choice is to contribute to an RRSP to get both the tax deduction and the tax-free compounding benefits. It’s the best option if your current marginal tax rate is relatively high and you expect it will be lower when you convert to a RRIF and start drawing income. You get the tax break now and pay a lower rate of tax when it pays you a retirement income.

On the other hand, if your tax rate is relatively high when you are drawing a retirement income from these plans, you might also lose other benefits such as the Old Age Security Supplement which could be clawed back if your income is too high. If you have a spouse, you may be able to reduce your income tax payable by splitting that income with them.



The TFSA does not provide for a tax deduction, but it offers flexibility and convenience — you can withdraw money from it without incurring taxes. If you’re young and without concern for owing income tax upon filing, the TFSA might be the better choice because you can use it for various short-term goals, emergency savings or long-term goals. If you’re older, it can be a great way to access income sources without consequence to your tax bracket or a planning strategy. It still maintains a great role as emergency funding or even a way to fund travel so you’re not accessing taxable assets for that last minute flight deal you found online.



Talking to Certified Financial Planners, like us, can be your best benefit in helping to properly develop a plan specialized to your life with the greatest benefits. But an important piece of the puzzle is just to get started saving. Commit to starting, perhaps with an automated regular contribution to one or both of the plans. Build your budget and spending plans around these contributions being automatic so the habit of money being allocated for your future benefit is natural and not tempting to spend.