What are the differences between an RRSP& a tax-free savings account?
In Canada, the Tax-Free Savings Account (TFSA) allows you to not pay taxes on select investments in the account. A Registered Retirement Savings Plan (RRSP) allows you to contribute taxable income towards retirement savings and defer the income taxes paid.ContributionsRRSP contributions can be deducted from income tax payable, overall reducing the amount of income tax paid. TFSA contributions are not tax-deductible.Contribution LimitsRRSPs have a contribution limit of 18 percent of earned income from the previous tax year, minus pension adjustment, up to the deduction limit defined by the Canada Revenue Agency. Any unused contributions are carried over to future tax years. A TFSA has a contribution limit of $5,000 per year.WithdrawalsRRSP withdrawals are taxed at a regular rate depending on which tax bracket you fall into. TFSA withdrawals are exempt from taxes and can be re-contributed, in full, in addition to the regular contribution limit.Withdrawal RestrictionsRRSP withdrawals can
