are TFSAs better than Registered Retirement Savings Plans (RRSPs) when it comes to retirement savings?
First, let’s recap how the RRSP works: you can contribute 18 per cent of your earned income up to the year’s maximum (currently $20,000 for 2008, and $21,000 for 2009). If you don’t maximize your contribution in any one year, the unused portion carries forward and gets added to your maximum for the subsequent year. The amount you contribute to an RRSP can be deducted from your income when you fill out your tax return form, saving you the marginal taxes you would have paid on your contribution amount. If you withdraw money from your RRSP, that amount will be added to your income in the year of withdrawal but won’t pay tax on the return you earn while your money remains in your RRSP. Therefore the main characteristic of the RRSP is that it gives you a tax deduction for contributions, but you’ll have to pay tax later when you take the money out. On the other hand, the TFSA allows you to contribute up to $5,000 per year regardless of income, starting in 2009. You will NOT get a tax deducti
