January 31st 2018

RRSP or TFSA Contribution

As we approach the RRSP period, we can certainly ask ourselves: « Is it better to invest in a TFSA or continue to grow your RRSP? » The answer is not simple. If your marginal tax rate at retirement will be lower than when you work, the RRSP is preferred for retirement and vice versa. Here is a comparative chart of the two investment vehicles.

RRSP – TSFA comparison RRSP TSFA
Contributions are tax deductible Yes No
Deposits and growth taxable at withdrawal Yes No
Carryover of unused deductions is allowed Yes Yes
There is an age limit for contributing 71 No
Withdrawals at any time Yes Yes

When you retire, the most important thing to remember is that withdrawals from the RRSP are added to the amount used to calculate the old age security pension and the guaranteed income supplement, not the case for withdrawals from the TFSA. In other words, it is beneficial to plan the balance between RRSPs and TFSAs to avoid being penalized in retirement. The revenue cap before seeing the OAS clawback is $75,910 for 2018.
TFSA Ceiling 
If you have never contributed to a TFSA the maximum lifetime contribution stands at $57,500. In 2018 the maximum contribution is at $5,500.
My role as a financial planner is to help you make the best use of the various income accumulation vehicles for retirement.

Mauro Di Cesare,  Fin.Pl.