Which plan should you invest in for your future?  In every case the answer depends on your personal situation.  Your age, residency, citizenship, income, marital status, dependant status, housing status, health status, disposable income status, and debt levels will all factor into helping to answer this question.

The primary use of RRSP is to defer tax payable on all deposits and to create a personal Pension Plan.

The primary use of TFSA is to save without tax consequence.

The limits of savings to each plan are different as the RRSP requires earned income reported to CRA  to set limits where the TFSA limits are set each year for everyone over the age of 19. As of January the 1st, 2017 the current limit is $5500.

Both plans are flexible and allow for withdrawal of funds. The RRSP withdrawal is reported as income and you will have to pay income tax at your marginal tax rate, where the TFSA is reported as a withdrawal from the plan and not include in income and no additional tax is calculated.

If you withdraw from the RRSP your contribution limit does not increase where as withdrawals from the TFSA can be redeposited* without reducing accumulated limits.

Most of the federal social benefits available in Canada are income tested and some of the provincial benefits for medical and seniors housing are also income tested.  Meaning that withdrawals from RRSP (RRIF) boost your income and may directly affect what you pay for these services.  TFSA withdrawals are not considered taxable income and won’t affect social benefits.

There are penalties of over contributing to each of these programs at a rate of 1% per month, however the RRSP allows $2000 over contribution without penalty.

US persons, who reside in Canada and earn income qualify for both RRSP and TFSA.  However there are tax complications for US persons investing in TFSA’s and most should avoid this plan as it does not escape tax under the current IRS rules.

For further explanation of the above brief, you may contact any of the advisors of Infinity Wealth.

This article was prepared solely by Mark Nichol, Roy Collings, and David Storrie who are registered representatives of HollisWealth® is a division of Industrial Alliance Securities Inc. (iA Securities), a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trade name and business name under which Industrial Alliance Securities Inc. operates. The views and opinions, including any recommendations, expressed in this article are those of Infinity Wealth alone and not those of HollisWealth. The comments contained herein are general in nature and professional advice regarding an individual’s particular situation should be obtained in respect of any person’s specific circumstances. HollisWealth and the Industrial Alliance Securities Inc. (iA Securities) companies do not provide income tax preparation services nor do they supervise or review other persons who may provide such services. Infinity Wealth is a personal trade name of Mark Nichol, Roy Collings, and David Storrie.