Ask the Financial Planning and Investments Expert – Christine Conway
When the proposed 2015 Federal Budget came out one of the items that got a lot of attention was the immediate increase in the Tax Free Savings Account limit to $10,000 per year. This will make TFSAs a more serious contender in the RRSP versus TFSA debate. As your personal TFSA limit accumulates every year, these plans have the ability to help you manage the amount of tax you pay, both now and in the future. But between RRSPs and TFSAs, how do you know which to choose? Here are some rules of thumb to help:
TFSAs are typically better if:
- You think that you’ll need to make a withdrawal in
the near future.
- You want a source of income that is not taxable
RRSPs will win out when:
- You have a high income or are in your peak
- You need the tax deduction.
The biggest downfall to an RRSP is that withdrawals are taxable. Tax rates increase based on your income, which means that you’ll want to do some careful planning to make sure that you’re not paying more tax than you need to when it’s time to take the money out.
Want to talk about it? Give us a call. We’re always happy to help.